Eastern Opening could double Hungary's FDI stock by 2023 - Economy Minister
According to the Economy Ministry, one of the central elements of Márton Nagy's speech was that Hungary should take advantage of its favourable geographical conditions to become a meeting point for Eastern and Western economies and technologies, and he gave examples of this in the automotive and battery industries (BMW, Mercedes, Audi, CATL, BYD).
He pointed out that the success of the government's policy of opening up to the East can be seen from the fact that the share of direct investment from Eastern countries in Hungary has risen to 34% from 10% in 2010. According to the statement, this government strategy is beneficial for the national economy for three reasons:
- Hungarian exports could rise to 100% of gross domestic product by 2030, while FDI stock, currently worth €100 billion, is expected to double. FDI inflows reached a new record of €13 billion last year, doubling from €6.5 bn in 2022.
- The multiplier effect of FDI inflow is also beneficial, as it boosts R&D through horizontal and vertical integration by collaborating with universities, and strengthens domestic businesses by linking them into and moving up the supply chains.
- Also noteworthy is the increase in logistics opportunities, which could raise the sector's output from 5% to 10% of GDP by 2030.
The minister reiterated his remarks from recent weeks that the European Union could be giving the wrong response to the unfolding global aid race by pushing for a return to the Maastricht criteria, which would severely undermine the recovery while putting EU member states at a competitive disadvantage.
He recalled that according to the International Monetary Fund (IMF), the budget deficits of the U.S. and China as a share of GDP could be between 7-8% over the next five years, while in the EU they will remain between 2-3%. Nagy said:
This means that the U.S. and China together will inject more than 20-25% of GDP into their economies than the EU over the next five years.
The minister opined that in contrast to the rules of the EU economic governance, which will become more stringent from 2024, as much of the budget resources as possible should be spent on increasing competitiveness and developing new industries. Temporarily higher budget deficits would not cause imbalances, as this would aim to restore and strengthen economic growth in the EU, he stressed, according to the statement.
We wrote about the re-tightening Stability and Growth Pact, the revised rulebook and the direction of fiscal policy here:
Márton Nagy also made it clear that "Hungary is doing its utmost to increase competitiveness. Thus, the European Union must also urgently take steps to strengthen its new industry and its competitiveness, instead of calling for a return to the fiscal and financial criteria of 30 years ago".
Cover photo: MTI Photo/Márton Mónus
