Hungarian companies already burn through their reserves amid the near-recessionary situation
"We are hopeful that the end of the war in Ukraine will become a reality and that a peace process can start to normalise markets. It would also be good if the customs war would calm down, because the current unpredictable »hacking« induces further dangers and unpredictability in the international and thus also in the Hungarian economy, which is characterised by a high degree of openness and therefore highly exposed to international trends," said László Perlusz, Secretary General of the National Association of Entrepreneurs and Employers (VOSZ).
As the latest results of the VOSZ Barometer show, businesses are keen to see the risk of inflation continue to decline, as successive interventions in market prices and profitability continue to increase uncertainty and unease.
It should come as no surprise that the reaction to this is to cut back on investment and to cut back on the already existing security savings, which also works against growth,
said László Perlusz.
We will see restrictions in the field of trade as a result of the margin freeze, since traders will practically not make any profit on the products classified in this category,
Imre Palkovics, president of the National Federation of Workers' Councils, told Portfolio.
As a result, planned investments are unlikely to materialise and retailers will also look to cut labour costs.
László Perlusz believes that even if the circumstances suddenly change for the better, i.e. if there is a ceasefire between Ukraine and Russia, or if there is a trade agreement between China and the United States, or between the European Union and the United States, the economic situation will not be restored to the one it was 4 years ago.
Even if conditions turn out for the better, demand will obviously not rebound overnight, but an improvement could be triggered as risks diminish, leading to a faster recovery.
The expected start-up of large investments in Hungary this year will also be good for growth - I refer to CATL, BMW and similar giant projects. These will be really useful if market integration and technology transfer really take place, Hungarian workers are given employment opportunities and Hungarian SMEs can also join the production chain - as suppliers. VOSZ will soon come up with a complex supplier programme for the latter," said László Perlusz.
In addition, the EU is already facing significant competitiveness problems on the world market, for example from growing Chinese competition. The weak performance of the industrial sector is in no small part a consequence of this,
said Imre Palkovics.
"Given that the manufacturing sector employs more than 20% of the country's workforce, incomes in this sector have a major impact on incomes in other sectors, so if there is a further decline, we should expect major cuts," he said.
Cost reduction is definitely a primary survival condition for companies,
László Perlusz said, adding that
the take-up of investment depends on demand. Until there is a clear and stable market demand, a sustained and significant expansion cannot be expected and most firms will hold back investment.
Cover photo (for illustration purposes only): Getty Images
