Growing inflation and budgetary limitations are the key challenges faced by Hungary's newly elected parliament, according to Jalsovszky Law Firm Partner Tamas Feher.
"Looking at the broader picture in Hungary, we have two major talking points at the moment," Feher begins. "First of all, as elsewhere, the war in Ukraine has had a major influence on Hungary and the region in general. Secondly, in Hungary’s recent elections, the ruling party led by Viktor Orban won the fourth consecutive term. While the win itself was not entirely unexpected, the extent of the win – that is, again, a two-third majority in the parliament – was quite a surprise for all sides of the political spectrum."
According to Feher, both the war and election outcome-related ramifications have led to challenges for the new government. "In parts of the business community we could sense some genuine anticipation about the potential change in the political atmosphere," he reports. "It seemed that some transactions were put on hold, dependent on the outcome of the elections. Also, because of the war in Ukraine, the general outlook of the business community is quite uncertain, which has already influenced the progress of ongoing M&A transactions."
On top of that, Feher says, "Hungary’s budget is not in a great state. It is very likely that the government will raise some taxes." He points out "this will most likely not affect the general taxes, yet the government and the National Bank of Hungary have already communicated about the possibility of implementing special tax regimes for certain sectors." According to him, "the government is trying to increase taxes in a manner that won’t directly affect the population or FDIs, however, service sectors such as telecom and banking might not be able to avoid the new tax regulations."
Further, Feher notes that growing inflation has been a major issue. "The government responded to it by capping prices of fuel, certain basic food products, household heating, etc.," he says. "This, on the other hand, led to some economic ramifications, as there have been attempts to benefit from the low prices in these areas," Feher adds, noting that private companies have seen a significant loss. "It has raised an interesting legal question, whether capping prices is in line with fundamental rights and the EU regulations. Some petrol companies have already initiated a lawsuit against the Hungarian state," he explains.
Finally, Feher points out that Hungary is in the process of implementing reforms related to company and real estate registration. "The government is aiming to create a more user-friendly procedure for registration, by taking a step toward digitalization and automatization. If implemented sufficiently, this is a positive step forward and, despite the potential increase in work for the legal sector during the initial roll-out phase, it simplifies the procedure in the long run," he concludes.
