Hollywood Strike Will Impact Hungary’s GDP This Year
Film production in Hungary has been hit hard by the U.S. screenwriters’ strike, which began on May 1, and the action by Hollywood’s leading actors, which has been ongoing since mid-July. According to calculations by Andersen Hungary, the downtime will reduce Hungary’s GDP by almost 0.35% over a year and result in a total loss of HUF 70 billion-80 bln in tax revenues for the central budget.
The Hungarian film industry closed another record year in 2022. The production volume exceeded HUF 250 bln, 90% of which came from American funds (in 2016, this figure was only HUF 85 billion).
Three main factors drove growth. Firstly, the success of the Hungarian support system, which has brought an increasing number of foreign film productions to Hungary. The weakening of the forint and the strengthening of the dollar also helped the process (although that trend has reversed this year). The third factor was the rise in service fees, which is experienced globally in the recovery from the COVID-19 pandemic.
Currently, Hungary is among the top 10 film production locations in the world. The main profile is to serve overseas studios; only the U.K. film industry represents a greater volume in Europe. This is why film production in Hungary and its nearly 20,000 employees have been hit hard by the strike by the industrial action.
According to Károly Radnai, managing partner of Andersen Hungary, the two parallel strikes impact productions made in Hungary differently.
“The strike by screenwriters only implied a medium-term slowdown; it didn’t cause any immediate damage. It didn’t affect any productions that were already in progress or pre-production here; there were no shutdowns; only the arrival of new projects has slowed down,” he says.
“By contrast, the strike by the Hollywood actors’ union led to the immediate stoppage of almost all larger productions, as filming couldn’t continue without the lead actors and major cast members,” Radnai adds.
In 2016, Andersen’s tax experts contributed to a study published by the Hungarian National Film Fund, according to which every forint spent on film productions in the country generates a budgetary income of HUF 0.32 and increases GDP by HUF 0.8.
“The reason for this is that, behind the spending, there is an intricate high value-added supply chain, predominantly linked to Hungary, with 95% of its funding coming from abroad. Although tax rates have somewhat changed since then, the ratio of the tax burden to GDP in the national economy has not changed substantially, so we have reason to assume that the ratios published in the study are still similar,” Radnai believes.
Based on the calculations, the Hungarian film industry’s share of GDP is currently 0.35%. Consequently, the downtime reduces Hungarian GDP by almost 0.03% each month, resulting in a total loss of HUF 6 bln-7 bln in tax revenues for the central budget.
This article was first published in the Budapest Business Journal print issue of September 22, 2023.
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