Economic policy is the main problem for Hungarian businesses

One of the main conclusions that can be drawn from the Q2 survey of around 400 VOSZ member companies is that there is a significant discrepancy between economic forecasts and businesses' everyday experience, said Ákos Kozák, VOSZ co-president, Equilibrium Institute co-founder and business relations director, at a discussion event presenting the recent survey.

VOSZ entrepreneurs do not see the growth potential that official forecasts would suggest,

he said.  

He pointed out that, while various research institutes were forecasting GDP growth of around 3-4% in September last year, the current projections are for growth of around 1%.

The Equilibrium Institute expects GDP to grow by 0.8% this year. In September last year, 3.4% was forecasted for 2025.

The main indicator of the VOSZ Barometer and two of its three sub-indices (business sentiment, financial situation, and investment propensity) showed minimal change compared to the previous quarter. The investment propensity indicator was the only one to fall, by 3 percentage points compared to the first quarter.

The headline index fell from 51% to 50%, which is a decrease of four percentage points compared to the same period last year.

Investment, the critical factor

Ákos Kozák emphasised that the value of the investment propensity sub-index had fallen significantly compared to both the previous quarter and the same period the previous year.

He added that only a quarter of managers expect to hire new staff and only a third plan to invest in new equipment. Around one in ten managers think they may need to make staff cuts this year.

This is the first time since the survey began that business leaders have cited economic policy as the most significant issue affecting the economy,

said Ákos Kozák. This means that, in relation to the country's economic situation, economic policy was the most frequently cited problem for SME managers. As in previous quarters, unpredictability and inflation remain key concerns for the country.

The biggest problems in day-to-day business operations continue to be labour shortages, the lack of orders and declining purchasing power. Labour shortages were one of the main problems cited when the economy was booming. The critical factor now is the lack of orders and declining purchasing power, said Kozák.

Worsening outlook

With a score of 56%, business sentiment has dropped by 1 percentage point compared to the previous quarter, marking the second lowest reading since the survey began. Perceptions of the current economic situation and short- and long-term business prospects are more pessimistic than in the previous quarter.

Compared to the previous quarter, the proportion of people pessimistic about the economic situation has increased again. 58% of business leaders considered the general economic outlook for the next quarter to be risky.

The long-term outlook for business owners for the next 12 months is much more negative than in the previous quarter, with a significant increase in the proportion of business owners who are very pessimistic and a decrease in the proportion who are optimistic.

Compared to the previous quarter, the proportion of people who believe that their sales will be at least 10% below target has increased significantly, rising to 27%.

As in the previous quarter, seven out of ten managers still do not intend to raise salaries. "There is likely to be a pay rise in this round, but this sentiment indicates uncertainty," said Kozák Ákos. Nevertheless, this figure is significantly higher than in the same period in 2023 and 2024. One in four respondents expects to increase their employees' salaries by up to 10%.

The proportion of businesses adjusting their prices to account for inflation remains high, at 71%.

Wage expectations

Ákos Kozák emphasised that there are no mass layoffs, but that labour market tightness is easing, which is unsurprising given the weak domestic demand and low levels of investment. In response to Portfolio's question about how much the easing of labour market tensions is reflected in workers' wage expectations, László Perlusz, Secretary General of VOSZ, pointed out that: "VOSZ-member SMEs — which have a better position and make more use of the support opportunities on offer than average businesses — are characterised by their 'last-ditch efforts' to retain their employees because

they have learned since the pandemic that it is ten times harder to rebuild a loyal, well-qualified workforce once it has been lost."

László Perlusz also emphasised the importance of the wage agreement at the beginning of the year, which led to significant wage congestion and increased wages.

Cover image (for illustration purposes only): Getty Images