DUIHK expects rapid economic recovery from COVID

Members of the German-Hungarian Chamber of Commerce and Industry (DUIHK) and other foreign investors expect economic activity to pick up this year, both for the economy as a whole and beyond for their own business, according to the latest chamber economic survey. .

András Sávos, president of DUIHK, said during the presentation of the inquiry that the global coronavirus epidemic in 2020 had caused an unprecedented setback for the international and Hungarian economies.

“We are starting from a weak base, but there is hope that we can make up for a significant part of last year’s weakening this year,” Sávos said.

As a result, many more companies plan to increase their workforce and investment than plan to reduce, according to the survey, he added.

He also noted that it was encouraging to see that despite the economic crisis caused by the pandemic, the trend of improving the business climate continued in a number of areas, with the country’s performance being superior. to the regional average in several respects and even placing it among the few.

Evaluating the results of the study, Finance Minister Mihály Varga praised the positive expectations of chamber member companies, as they support the Hungarian government’s growth forecast of 4.3% for the Hungarian economy this year. According to the minister, the more than 2,800 German companies operating in Hungary, employing more than 200,000 people, play an important role there.

Virus rebound

This year’s DUIHK study specifically addressed the economic impact of the coronavirus. More than a third of companies said they had already returned to pre-coronavirus revenue levels, which are expected to rise to more than 50% by the end of the year. In comparison, around 40% of respondents expect to return only in 2022 or later.

One of the long-term consequences of the crisis could be the transformation of global production and supply chains. According to the survey, one in two businesses in Hungary and the region plan to expand their supplier base and replace some suppliers.

In doing so, a significant proportion of respondents would look for new suppliers, mainly in the EU countries of Central and Eastern Europe; however, a large number of companies say they are also looking for new suppliers in Western Europe.

The vast majority of companies surveyed, around 88%, would reinvest in Hungary, the highest proportion ever measured in the chamber survey. This commitment is underlined by the fact that Hungary was considered as the most attractive investment location out of 20 potential destinations in the national study.

After the economic downturn of 2020, most businesses expect economic activity to pick up again this year, for the economy as a whole and even more so for their own business. Almost one in two respondents expect their business situation to improve over the next 12 months, and only 15% expect their business to deteriorate.

According to the survey, the positive economic outlook encourages companies to develop employment and investment. For both indicators, around 40% of respondents expect a higher level than last year, while only one in ten plans to cut jobs and one in six to cut investments.

Labor concerns

Compared to previous years, the availability of skilled labor has improved somewhat, but one in two managers is still not satisfied with the current situation. With the expected economic recovery, labor shortages could increase further this year, with nearly one in two respondents identifying this as a serious risk.

On average, companies reported a 6% increase in labor costs this year. DUIHK says this is more likely to represent the lower bound of actual wage dynamics. The satisfaction of business leaders with the quality of vocational training and higher education systems has increased. Despite this positive development, the performance of the vocational training system remains below expectations, in particular that of manufacturing companies.

In 2021, the trend of a gradual improvement in the perception of the Hungarian economic policy framework continued. In public administration and tax administration, Hungarian business ratings have caught up with the main Baltic states and satisfaction is above the regional average on several other issues, notes the chamber.

In other areas, however, the situation remains unsatisfactory, despite the trend for improvement. There are still more criticisms than praise for public procurement transparency and corruption, and the rating is also below the regional average.

The quality of infrastructure was rated positive by half of the companies responding this year, the highest proportion to date. In this regard, Hungary also ranks high in a regional comparison.

Across the 16 countries surveyed in the region by the German Chambers of Commerce (AHK), Estonia is again the most attractive investment target this year, ahead of the Czech Republic and Poland. Hungary was again in the middle of the pack in 10th place out of 20 destinations, although there were only minimal differences in scores in the top half.

DUIHK conducted its first survey of Hungarian enterprises in 1994. This year the survey was carried out between March 12 and April 16, with the participation of 206 entrepreneurs. Since 2006, the survey has been carried out simultaneously in several countries of the region by AHK. In 2021, a total of 1454 participants took part. The international survey is coordinated and analyzed by DUIHK in Budapest.

This article first appeared in the print issue of the Budapest Business Journal on May 21, 2021.

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