“The Hungarian economy is not in bad shape” said Peter Lakatos, the Founder and Managing Partner of Lakatos, Koves and Partners, and it is in fact “much healthier than it used to be, with more transactions and projects where lawyers are needed.”
He identified Corporate/M&A – particularly in the energy sector – and NPLs in the banking sector as areas that have kept his firm’s lawyers busy. The real estate sector has also been busy, he reported. Ultimately, Hungary’s economy is, like that of most other countries, closely tied to the global economy, and it is especially connected to Germany – and this dependency means that, in Lakatos’s words, “if Germany does well then Hungary does well, and if Germany has a problem then Hungary has a big problem.”
Lakatos identified a shortage of labor as one of the key concerns in Hungary at the moment, calling it “a problem that arises because of the large economic activity” and the fact that the population in Hungary is actually shrinking. Still, this phenomenon is likely to propel the continued modernization of the economy, he explained, which could be positive in the long run, though not before then.
In addition, disagreements between Hungary and the rest of CEE and Western Europe have intensified, Lakatos reported, as a result of political controversies involving, among other things, the treatment of refugees – an issue which has significantly impacted the economy. Another issue is the upcoming revision of the EU Posting Directives, which has implications for the service sector and may provide a potential reduction of the competitive edge of some countries in the region. This revision, he explained, requires an employer from this region to pay the minimum wage applicable in the hosting country rather than the country of primary operation.
When asked his opinion on the controversial new Hungarian law threatening the continued operation of Central European University in Budapest which has garnered significant international media coverage, Lakatos said “it is clearly a political issue” with unfortunate implications for the Hungarian reputation both politically and in terms of the business climate. He noted that Germany has been diplomatic in its response to the current law because it needs to keep Hungary in the European Union and German industries need to keep manufacturing here. He concluded by noting that, in any event, investors from a number of countries showing increased interest in the region were unlikely to be deterred by such issues.
In addition to Hungary’s still-relatively new electronic litigation procedure rules, Lakatos described the State Administrative Procedure Law, which regulates the procedures of the state administrative organs, as a significant legislative development in Hungary. He described the law as “very important,” as it regulates all procedures between citizens and all state agencies.
In summary, the Hungarian economy is stronger than it was 18 months ago, and the last calendar year marked a turnaround for Hungary in terms of economic activities and transactions. However, Lakatos warned, it is important to stay cautious and aware that the good times may not last.
