The global economic downturn has hit Hungary much like the rest of the region but the country may be on its way to a quick recovery on the wings of diverse and dispersed investor interest, according to BLS-CEE Hungary Partner Erzsebet Szalay.
“The global economic slowdown has impacted the entire region, and Hungary has been feeling the consequences too,” Szalay starts. “Still, with the recently passed US inflation reduction act, and with all of the economic activity in Western Europe to keep the markets alive – I’d say that we can expect a quick recovery of the region, in terms of legal work at least.” Additionally, she reports of strong investor appetite coming in from the far east. “In addition to investors from the Netherlands, the Nordic regions, and the US – we have also seen investment interest from China and South Korea.” According to her, these investors are no longer looking only into single countries when deciding on where to place their funds, but are seeking to have more of a “regional footprint for their ventures.”
Focusing specifically on Hungary, Szalay says that, somewhat surprisingly, the bulk of these investments is no longer going to Budapest. “The countryside is developing admirably, with a high number of manufacturing companies seeking to settle all over the country, especially so next to the Danube river." She notes that most of the upcoming development is to be expected in logistics and infrastructure. “Major production facilities are popping up all over Hungary,” she says.
Turning more to the legal markets, Szalay shares that she expects an increase in dispute resolution. “As usual, whenever there’s an economic downturn, two areas go up in terms of activity – dispute resolution and M&A transactions. In this particular instance, I have to say, however, that disputes are no longer happening due to the pandemic blowback,” she continues. “The cause is to be found in the global economic instability and market volatility – high energy prices, unfavorable forint foreign exchange rates, and the inflation tide, to name but a few. With many companies having settled on their business plans for the next few years and now having to rework their approach, downsize, shrink, or change course – a change in their contract network is logical, but it also means having to deal with commercial litigation,” Szalay explains.
Finally, taking the temperature of the Hungarian economy, Szalay reports good vibrations. “Everyone has a bit of a sunny disposition of late, with a deal being struck for some EU funds. However, receiving the actual funds under the recently sealed political deal is still a way off and, with some of the EU funds still being frozen, the economy might struggle more.” Still, she concludes, “overall, we see a wealth of opportunities.”