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Hungary’s Logistics Market Could Again Rise by 6% This Year

Hungary’s logistics providers are likely to stay on a growth path this year and remain a key driver of the economy, but the lack of skilled professionals continues to be a risk and protectionist steps on Western European markets pose a danger.

Zoltán Bándli, managing director of DHL Express Magyarország Kft.

Unless an extraordinary event occurs, a 4-6% increase in growth is once again on the cards, Zsolt Fülöp, the chairman of industry alliance MLSZKSZ told the Budapest Business Journal. Logistics market participants contribute about HUF 2 trillion to domestic GDP annually, which comes to 6.5% of the total. This makes logistics the fifth biggest total revenue-generating sector.

The largest privately-owned participant of the Hungarian market, Waberer’s International Nyrt. is looking to repeat its 18% annual revenue growth registered last year. It is also set to strengthen its activity within the automotive and e-commerce sectors, and is actively seeking acquisition targets in the region, the company’s CEO Ferenc Lajkó said in the firm’s latest annual report.

DHL Express, a global shipping firm and logistics provider is also positive about expected growth. It forecasts a boom in online shopping in both developed and emerging markets with a 25% annual average increase in the coming years in e-commerce, Zoltán Bándli, managing director of DHL Express Magyarország Kft. told the BBJ. “About 8% of all retail turnover is online. This could grow to 30% by 2025 in emerging markets,” Bándli said.

But maintaining the sector’s above-average growth rate hinges on an array of factors such as the national and EU regulatory environment, a nationwide lack of workforce, or major international events that affect the economy of the entire EU, such as Brexit, since most major Hungarian logistics providers are also active in neighboring countries and the European Union.

The greatest challenge for Hungarian logistics providers with international activities is that some Western European countries have introduced protectionist measures, Hungary’s state secretary responsible for transport policy claims.

Strategic Area

“This is a strategic area for the government, which is therefore ready to use any measures to increase the competitiveness of Hungarian logistics providers and strengthen or maintain their position within the European Union,” Róbert Homolya, State Secretary for Transport at the Ministry of National Development said at a press conference earlier.

Hungary is set to cooperate with its allies in the region and act shoulder-to-shoulder with the other members of the Visegrad Four (Czech Republic, Poland and Slovakia) to persuade the EU that its Western European members are acting against common values.

Taking up a lead role in keeping the issue on the agenda, Hungary was the organizer of a summit on March 8 with the participation of 14 EU members. Those present also discussed the European Commission’s Clean Mobility package, which instead of helping market participants would increase burdens – mainly on small- and medium-size companies – and increase administration, Hungary claims.

The package would introduce new carbon-dioxide standards, promote clean mobility solutions in public procurement tenders, foster innovation in new technologies and encourage alternative fuel use throughout the EU.

To widen the currently narrow pool of available professionals, the government introduced a Logistics Action Plan in 2015, pledging to train 6,000 new truck drivers. This stood at 2,000 new drivers last year, at the time of the latest update on the program.

Blindside Fears

The market has been on a steady growth path since the financial and economic crisis of 2008, but players are still wary of another huge blow that could take them on the blind side. These worries should ease, since the industry will have gained enough strength to persist any unexpected events without heavy losses, Fülöp said, if the current market growth rate persists for at least two to three more years. To maintain balanced growth, however, state funding would also be needed, he added.

DHL Express’ Bándli said risks to the industry over the coming period in the region could be the expected measures of the European Union and Great Britain related to Brexit.

International challenges lingering around the industry also include countries further away, such as China, which is aggressively boosting its international trade and Hungary hopes to become a regional hub for the Far-Eastern country’s trading companies. But the whopping economic growth may eventually prove a bubble, and if so, a burst would indeed pose a risk for Hungary’s market participants.

The conflict between Russia and Ukraine is another area of concern for Hungary. Shipping Chinese goods to the EU through Ukraine would be a nuisance for Russia, which is in turn a negative for Hungary’s rail transport.

Areas where market players expect the government to take steps also include the development of rural logistics centers, where infrastructure needs to be improved to attract further companies. Logistics hubs around Budapest and the country’s biggest cities, as well as those located in the proximity of motorways or busy ports, are all now more or less full. Secondary locations, however, must upgrade their range of services to increase occupancy, industry onlookers said.

The state claims it is applying measures to boost this fruitful industry and is listening to logistics service providers and haulers. A range of measures introduced last year are bearing fruit, Homolya said, such as higher fines and regulations that crack down on tax evasion or irregular international hauling.

László Mosóczi, a deputy state secretary at the transport ministry, has said the parallel development of water, air routes, rail and road transport are key for long-term growth. The government is making efforts to modernize trade harbors, build and reconstruct motorways (especially those close to the borders), and welcomes infrastructure developments at Budapest Airport (for more on this, see page 15). Hungary has earmarked HUF 2.5 tln for road development by 2022, of which 52% will be covered by the state.