Minister for National Economy Mihály Varga has given AmCham a ringing endorsement, saying its work is “highly appreciated” by the cabinet and the chamber is a “strategic partner” that shares government objectives.
The minister was speaking at a business forum at the InterContinental Budapest on Friday, February 24. “I very highly appreciate the work of members of the chamber in improving economic competitiveness,” he said, starting his speech in English before switching to Hungarian.
He noted that much of what AmCham was promoting was “in line with government objectives”, adding: “We [the government] regard AmCham as a strategic partner.”
As government representatives have done so often in their recent rhetoric, Varga made much of the new economic and political realities of a world that sees the White House putting “America First” under President Donald J. Trump, and Britain on the verge of pulling out of the European Union.
The economy minister said the United States is a vitally important partner to Hungary, being the second biggest investor after Germany, and the number one export destination outside of the European Union.
“We all agree that partnership between the government and U.S. companies is important, and different visions, a different balance are necessary for long-term development. The new situation offers new challenges: migration; immigration; the development of the world economy. Brave approaches and new economic policies are needed,” he told members. “This coming year and next could be a period of economic growth of extraordinary pace, for which we have waited a long time.”
In a speech that extolled the economic success of Hungary, he noted that “important external judges” such as the ratings agencies were looking much more favorably on the country now. “State debt is kept under supervision. The government now would need 100 years to increase the debt or deficit, but we do not do that! We evaluate that confidence has come back to the Hungarian economy.”
Even the relatively poor performance of Hungary’s GDP growth last year (the minister quoted the 2% “raw data” figure, although calendar- and workday-adjusted figures released by the Central Statistical Office actually put it at 1.8%) was given a positive twist. Noting that 2016 effectively fell between two EU funding cycles, and therefore saw a drop in the money available for investment, Varga suggested that the growth achieved in 2016 carried much greater significance than the figure alone might imply.
“This 2% is perhaps more valuable than the 3% or more in previous years. [...] Now, last year we could see whether Hungarian growth could be maintained without EU funding. After 2020 [the end of the current EU funding cycle], if EU funding is not available, there is growth potential in the Hungarian economy.”
He identified agriculture, the services sector and increased internal demand as strong drivers of the economy, but noted that industry had performed less well and construction was a definite drag on last year’s figures. He also accepted that, having gone from 12% unemployment in 2010, when Fidesz was returned to power, to 4.6% unemployment last year, these positive figures also carried a negative side, namely a growing shortage of labor that affects all fields. “There is no sector where there is an over supply of workforce,” he said. Noting that the National Employment Service (NFS) provides a weekly breakdown, Varga said there were 67,000 vacant positions in the Hungarian economy, ranging from high value jobs to the low skilled. “There are 7,000-8,000 vacant jobs for cleaners; this [problem] is sector-neutral. Actual and available reserves [in the population] should be mobilized; training should be made up-to-date to accommodate the needs of the economy.”
The government was working to that end, he said, and again praised AmCham for its input and suggestions, saying many ideas had already been taken onboard and implemented. The government itself, working with employers and unions, had reached a complex six-year agreement to lower employer contributions (already reduced from 27% to 22%, and set to come down to 15% by 2022, he said). “The minimum wage will have to be changed, and will increase by 15% next year.”
The long awaited competitiveness council, which will advise the government, now appears close to formation. “Partners have been invited in the past few days. I am pleased to say [AmCham] President Farkas Bársony has been invited and has said yes.”
Looking forward, Varga identified three key areas for improving GDP growth: 1) improvements in competiveness and efficiency; 2) quality jobs that create higher added value; and 3) the involvement of ever more Hungarian SMEs in multinational value chains.
An edited version of this article appears in the March issue of JOURNAL, the AmCham magazine.