Irish – Hungarian Economic Relations

Hungary had successfully completed the transition from a centrally planned economy to a market economy by the mid nineties. After that, due to fast and profound structural and institutional changes, Hungarian GDP has increased consistently faster than the average GDP of all EU members states.

Restructuring of the Hungarian economy was supported to a great extent by a remarkable inflow of foreign capital. The stock of inward FDI was roughly 50 billion euro at the end of 2005. Most multinational companies have established in Hungary business operation.

External trade is of vital importance for Hungary’s economic development. The lion’s share of Hungarian exports goes to the EU countries. Just after the economic transition in 1990 the current EU members accounted for only 42 percent of Hungary’s exports and 43 percent of its imports, but today the exports to the EU has grown to 75 percent, and goods imported from there to 60 percent.

Ireland has not been traditionally a very important trade partner for Hungary, but in recent years we have witnessed a very dynamic increase in the bilateral trade turnover. Bilateral trade figures by commodity groups are:

Value: million EUR at current price

Source: KSH

Remembering that in 1989 the bilateral total trade turnover was 21 million euro (of which Hungarian export was 8 m and Irish export 12 m) and seeing that the same data for 2000 year has exceeded half a billion euro we can speak about an increase of 25 timesin around 10 years.

2002 and 2003 saw - parallel to the global recession of demand – a deteriorating performance in bilateral trade. Following the lowest point in 2003, demand has begun to increase slowly, including Hungarian exports to Ireland, and this growth seems to be continued in future.

Major Export products of bilateral trade in 2004.

Value: in 000 euro

Source: CSO

Investment is a key area of Irish business in Hungary as Irish companies commercialise opportunities in the market by establishing subsidiaries. Ireland is ranked as the 18th largest investor in Hungary with more than 40 companies present in the market. The local business units of Irish companies in Hungary indicated a turnover exceeding €62m and employing more than 600 Hungarians in 2003.

Opportunities exist for Irish investors in a variety of sectors in Hungary specially in the automotive sub supply manufacturing, the electronics and telecommunications, the engineering sector utilizing the long tradition of Hungarian engineering coupled with low costs, an educated workforce and a market provided by the demand of regional investments made in Hungary by multinationals. Hungary is an ideal location enabling easy access to customers both east and west assisted by the ease of doing business within the country.

The process of preparing for EU accession has been ongoing for more than a decade. Hungary is committed to making the necessary steps in order to join the European Monetary Union as soon as possible.

Changes of major economic indicators of Hungary in recent years

Values: billion EUR or year/year increase in %