3Special
BBJ
Report
year 5: Cooler than last Forecast for 201
THE YEAR AHEAD
SPECIAL REPORT: VOL. 23. NUMBER 01
s may Official prediction than be more upbeat others, but everyone that seems to agree will growth in Hungary it was not be as hot as at the in 2014. We look s for economic projection the next 12 months. GABRIELLA LOVAS
crystal ball look into their economy When analysts see Hungary’s for 2015, they although at a slower continuing to grow, and with increased year pace than last The main external the downside risks. developments in inflation threats noted include as growth and European Union, to remain low this Bank in Europe are expected European Centraleasing year. Thus, the it turned out approximately a quantitative be a challenge. this month that of will probably launch Audi announced pace in 2015 may involves the purchase car manufacturer than in 2013. Keeping up that program, which slow growth, unit of German of more top On weak Hard to repeat: The Hungarian in Győr, nearly 50,000 government bonds. price cuts slowly governments and last year at its factory the regulated utility highly indebted developments in Greece 2 million engines projects after base, market−based As no such grand is no disappear from the the falling oil prices, banks, the recent impact on the eurozone been slackening. this year, there price cuts, namely and their potential of last utility This, in turn, could will be implemented the continuation keep the rate down. the central bank’s are also worrying. of geopolitical tensions reason to expect In 2015, Tóth expects will of increase rate East The implementation The escalation year’s dynamics. of 5%, tops. He agrees theoretically for further base and the Middle room for maneuver due to developments in Russia, Ukraine greatest threats cited capacity expansions industrial growth the be driven by domestic Tóth warns that of the carmakers’ are also among path that growth will he doubts that this alone cuts. external environment, extra caution unpredictable a policy. by analysts. The further uncertainties for demand, although for the slowdown in in the and investments gave with respect to monetary price of oil creates could compensate cardinal question is is needed businesses. this huge impetus to industrial the other areas. Another sphere will be private unemployment the jobs Decreasing active investments and growth last year. However,past how projects a slight far from year. Market−based Slower growth of the central bank increase, but it is the rate to concerns The have shown some which reflects industrial statistics in the unemployment Tóth expressed inflation, The 2015 budget, expectations, assumes of the decrease this sufficient, yet. a result of low that As official performance show 2015. in may 7.6% However, few months government’s over the expectedtoo. in the private sector 2.5% this year. Varga wage dynamics GDP growth of agricultural sector, in 2015. Minister Mihály $60 effect has been slackening. growth remain moderate National Economy however, that the that oil prices below GDP GKI points out, employees, has already said 2015 “genuine” inflation of Hungary’s raise number Subdued per barrel could percentage is rate in the are working in much as half of a only those who forecast for 2015 European growth rate by as The MNB’s inflation remaining including and excluding public workfare forecast. involved the favorable in investments at around 0.9% with inflation point above the official projection is more These ahead Hungary is significantly smaller than cycle, a surge of months immediately schemes, As usual, the official other forecasts. business by EU funding and a reduction In 2015, the negative in the most from the first half what official statistics show. to grow to boost purchasing and then gradually rising optimistic than bank (MNB) projects financed costs intended can be explained research firm expects employment rate to be Even the central The MNB utility In addition, Hungary’s international of 2015. The low figure price unemployment growth, at 2.3%. such as the low power. deteriorating of public by 1%, and the somewhat lower cost−side factors, Inflation Report is said to be further expansion economic by products and imported complete 7.5% due to the says in its December will primarily be assessment regulated government’s almost area, oil, the the of to euro and growth through in the schemes than further due that economic products. Inflation continues workfare of social support. demand rather of nationalizations trading partner, measures and policy market policy driven by domestic Hungary’s main agree that fiscal inflationary elimination “Improving labor acquisitions, anti−market a All stakeholders exports in 2015. low, thus external to maintaining inflation, accommodative suspected corruption. Gegely Tóth sees to be thus it will remain subdued. inflation remains committed conditions, low and easing prudential deficit level, and Buda−Cash analyst the GKI’s Hungary’s pressures The low government monetary conditions to the conversion of slowdown in In comparison, as with the below the 3% target. due year’s figure 2.4% of should remain is around 2%, support a considerable considerations growth from last loans will all The projection impact of the utility price ESA deficit is expected to reachdebt will foreign currency the central bank. The economic than 3% to 2.2% in 2015. set However, public capacity weakeningand tax increases, prices are GDP in 2015. expect a of more growth,” claims a snail’s pace, of carmakers’ the MNB both a huge reduction In contrast, Buda− to decrease at implementation government and investments gave increase in 2015. to remain subdued, continue household consumption. expansions and last year. to inflation analysts say. 2.8% increase in to industrial growth forecast of research the Cash expects this year. Tóth believes that According to the will grow by only 2% impetus the industrial statistics of 0.7% has at around GDP to the However, that this effect institution GKI, factors contributing away. past few months show this year, as the in 2014 are fading dynamic growth
PROJECTIONS FOR 2015 JANUARY 16, 2015 – JANUARY 29, 2015
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Despite recent diplomatic tensions with the U.S., the Hungarian government and American businesses are officially working together under a strategic agreement signed with AmCham. 09
BUSINESS
SPECIAL REPORT
Banks look forward to a break in 2015
Where would you want to work?
Forecast: Slightly cooler than it’s been
With borrowers’ relief legislation and state takeovers, last year was tumultuous for financial institutions, but now that the government has what it wants, analysts say bankers can expect some peace. 03
Competence of corporate leaders and respect for workers are key attractions, employees say. As competition for the best and brightest heats up, more firms are listening to this advice. 07
Slower but continued growth, better real estate sales and a continued drag on the economy due to the Ukraine conflict – these are some of the preditctions that analysts tell us to expect in 2015. 11
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Budapest Business Journal | January 16, 2015 – January 29, 2015
BBJ
3Special THE YEAR AHEAD
SPECIAL REPORT:
Forecast for 2015:
SUBSCRIPTIONS
Report
Cooler than last
year
may Official predictions than be more upbeat others, but everyone that seems to agree will growth in Hungary it was not be as hot as at the in 2014. We look for economic projections the next 12 months. GABRIELLA LOVAS
ball look into their crystal When analysts economy see Hungary’s for 2015, they although at a slower continuing to grow, and with increased year pace than last The main external the downside risks. developments in inflation threats noted include as growth and European Union, to remain low this Bank in Europe are expected European Centraleasing year. Thus, the it turned out approximately a quantitative be a challenge. this month that of will probably launch Audi announced pace in 2015 may involves the purchase car manufacturer than in 2013. Keeping up that program, which unit of German more On top of slow growth, weak Hard to repeat: The Hungarian in Győr, nearly 50,000 government bonds. price cuts slowly governments and last year at its factory the regulated utility highly indebted developments in Greece 2 million engines projects after base, market−based As no such grand is no disappear from the the falling oil prices, banks, the recent impact on the eurozone been slackening. this year, there price cuts, namely and their potential This, in turn, could of last utility will be implemented the continuation keep the rate down. the central bank’s are also worrying. of geopolitical tensions reason to expect In 2015, Tóth expects will of increase rate East The implementation The escalation for further base year’s dynamics. of 5%, tops. He agrees theoretically and the Middle room for maneuver due to developments in Russia, Ukraine greatest threats cited capacity expansions industrial growth the be driven by domestic Tóth warns that of the carmakers’ are also among that growth will he doubts that this alone cuts. external environment, extra caution unpredictable path a policy. by analysts. The further uncertainties for demand, although for the slowdown in in the and investments gave with respect to monetary price of oil creates could compensate cardinal question is is needed businesses. this huge impetus to industrial the other areas. Another sphere will be jobs Decreasing unemployment active the private investments and growth last year. However,past how projects a slight far from year. Market−based Slower growth of the central bank increase, but it is the rate to concerns The have shown some which reflects industrial statistics in the unemployment Tóth expressed inflation, The 2015 budget, expectations, assumes the decrease sufficient, yet. a result of low that this performance of 7.6% in 2015. As the private sector may government’s official this year. However, few months show over the expectedtoo. in 2.5% Varga wage dynamics GDP growth of agricultural sector, in 2015. Minister Mihály $60 effect has been slackening. growth remain moderate National Economy however, that the that oil prices below GDP GKI points out, employees, has already said 2015 raise Hungary’s number of “genuine” working in Subdued inflation per barrel could percentage is rate in the are much as half of a only those who forecast for 2015 European growth rate by as The MNB’s inflation remaining including and excluding public workfare forecast. involved the favorable in investments at around 0.9% with inflation point above the official projection is more These ahead Hungary is significantly smaller than cycle, a surge of months immediately schemes, As usual, the official other forecasts. business by EU funding and a reduction In 2015, the negative in the most from the first half what official statistics show. to grow to boost purchasing and then gradually rising optimistic than bank (MNB) projects financed costs intended can be explained research firm expects employment rate to be Even the central The MNB utility In addition, Hungary’s international of 2015. The low figure price unemployment growth, at 2.3%. power. such as the low deteriorating of public by 1%, and the somewhat lower cost−side factors, Inflation Report is said to be to the further expansion complete economic by products and imported says in its December will primarily be assessment almost area, 7.5% due to the government’s through of oil, regulated growth in the euro schemes and the than further due that economic products. Inflation continues workfare of social support. demand rather of nationalizations trading partner, measures and policy market policy driven by domestic Hungary’s main agree that fiscal inflationary elimination “Improving labor acquisitions, anti−market a All stakeholders exports in 2015. low, thus external to maintaining inflation, accommodative suspected corruption. Gegely Tóth sees to be it will remain subdued. inflation remains committed conditions, low level, and thus and easing prudential Buda−Cash analyst the GKI’s Hungary’s pressures government deficitthe 3% target. The monetary conditions to the conversion of slowdown in In comparison, with the low below due year’s figure around 2%, as should remain support a considerable considerations reach 2.4% of projection is growth from last utility price loans will all is expected to in 2015. The The economic impact of the debt will foreign currency set ESA deficit than 3% to 2.2% the central bank. However, public capacity weakeningand tax increases, prices are GDP in 2015. expect a of more growth,” claims a snail’s pace, of carmakers’ the MNB both a huge reduction In contrast, Buda− to decrease at implementation government and investments gave increase in 2015. to remain subdued, continue household consumption. expansions and last year. to inflation analysts say. 2.8% increase in to industrial growth forecast of research the Cash expects this year. Tóth believes that According to the will grow by only 2% impetus the industrial statistics of 0.7% has at around GDP to the However, that this effect institution GKI, factors contributing away. past few months show this year, as the in 2014 are fading dynamic growth
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Despite recent diplomatic tensions with the U.S., the Hungarian government and American businesses are officially working together under a strategic agreement signed with AmCham. 09
BUSINESS
NEWS
SPECIAL REPORT
Banks look forward to a break in 2015
Where would you want to work?
Forecast: Slightly cooler than it’s been
With borrower’s relief legislation and state takeovers, last year was tumultuous for financial institutions, but now that the government has what it wants, analysts say bankers can expect some peace. 03
Competence of corporate leaders and respect for workers are key attractions, employees say. As competition for the best and brightest heats up, more firms are listening to this advice. 07
Slower but continued growth, better real estate sales and a continued drag on the economy due to the Ukraine conflict – these are some of the preditctions that analysts tell us to expect in 2015. 11
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Free speech is not just a concern in France Along with conveying horror at the barbaric terrorist acts in Paris, the global outcry about the murder of journalists at Charlie Hebdo is a call for the preservation of freedom of expression, even if some people find that expression offensive. We add our voices to those who abhor the violence and demand that free speech be protected. We also hope that the importance of free expression is remembered beyond this moment, but we have reason to be skeptical. Many of the leaders who marched in Paris, including Hungary’s Prime Minister Viktor Orbán, have a dubious record on press freedom. Instead of promoting open dialogue, Orbán’s Fidesz party has systematically worked to prevent journalists from performing their essential democratic function of shining a critical spotlight on government activities. Shortly after Fidesz won an overwhelming victory in the 2010 election, the party used its supermajority to pass a raft of laws that allow the country’s leadership much stricter oversight of the media. The government also tightened its grip on the media regulatory body and the public media,
and further politicized Hungary’s already opaque process of issuing private broadcast licenses. Other actions since 2010−2011 have singled out government enemies. This was apparently what happened with the 2014 passage of an advertising tax that takes the biggest financial toll on RTL Klub, a TV station seen as critical of the government. Along with using laws to stifle opposition voices, the government, which is one of the country’s biggest advertisers, uses its position to give financial support to media outlets it favors. Through these, and other political, legal and economic means, the government seeks to reduce independent voices in the media and to intimidate journalists, who fear legal and economic reprisal if they are critical. No, journalists are not being killed, like those who died in Paris, but their coverage is adversely affected. This approach goes against the spirit of free speech that the rally in Paris was meant to support. It also weakens democracy in Hungary, by keeping citizens in the dark about the activities of their government.
Improvements afoot for BBJ print and online You may notice some design changes in this edition of the Budapest Business Journal. These changes are meant to enhance your reading experience, and are part of an ongoing series of improvements that the BBJ has been making, and will continue to make, in print and online. Already, we have greatly increased the number of stories we publish every day on our website, making bbj.hu one of the most comprehensive sources of breaking English language news about Hungary. We have some more exciting changes coming to the website in the coming months. Our print publication will include more in−depth stories, like those
featured in this edition’s Special Report on predictions for 2015. Among the good reads there is an interesting analysis of what can be expected in Ukraine this year, and how that should impact us. The next print edition, due out January 30, will have a Special Report timed for the tax season. It will feature interviews with Hungary’s biggest accountants and tax consultants, who will tell you what to expect from the 2015 tax code and explain how they can help your business. More exciting changes are coming up. Please watch this space, and bbj.hu, where we will keep you informed. In the meantime, happy reading!
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Above is a photo of the South Buda transport hub, then known as Moszkva tér (Moscow Square), in 1952 in an image from Fortepan.hu. At right is the square, now called Széll Kálmán tér, on January 12, as reconstruction work began. According to plans, the square should have a new look by next year.
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NEWS
Demonstrators seen to be lacking leaders 4 NEWS
Analysts calm as forint and prices nosedive 5
macroscope
Political pressure on banking sector to ease in 2015 After legislation to compensate borrowers, and state takeover of some institutions, the government seems to have banks where it wants them.
“The major danger of the state-owned banking system is that in the absence of independent control, subjective factors play an important role in lending, and this makes the functioning of the banking system more risky.”
GABRIELLA LOVAS
misunderstand the law, which regulates interest rate spreads rather than the rates themselves, said Lovas. Interest rates are at a very low level now, but there will be a big surprise, when they go up later. She thinks that at first sight this looks like a consumer protection measure, however, it benefits banks, too, as they cannot be held responsible for changing their rates anymore.
I had a dream
Photo: MTI/ Zoltán Máthé
Although Hungary’s banking system faces another tough year in 2015, the pressure on the sector is expected to ease somewhat compared to last year. A very positive sign is that terms like “banks are the problem” are disappearing from the political rhetoric. As 2014 was an election year, the ruling party wanted to benefit politically from anti−bank messages and measures. This won’t be necessary this year. The fact that all outstanding Swiss franc− and euro−denominated loans are to be converted into forints at market rates rather than rates favored by debtors and the ban on foreign−currency loans indicates the easing of political pressure on the sector, Judit Lovas, chief editor of online financial journal azenpenzem. hu (which translates as “It’s my money”) told the Budapest Business Journal. The use of non−market rates or another early repayment scheme were among the banks’ biggest fears. Furthermore, the Settlement Act provides a solution to the FX loan debt problem, which has been a huge pressure not only on the banking system, but also on Hungary’s economy and society since the beginning of the financial crisis, said Lovas. After the act was passed in September 2014, banks started to set aside provisions, which appeared in their In charge: Central Bank governor György Matolcsy. 2014 balance sheet. As a result, the banking sector was November, it is hard to give a more exact to the problem of the worst debtors and of deep in the red last year and some banks estimation of the settlement costs. The the non−performing loans. even needed capital injections from their decrees contain the formula to be used by The fair banking law is expected foreign parents. However, financial institutions to to contribute to reducing the credit this also means that calculate their liabilities risk of banks in the longer−term. to consumers arising due The government approved the bill to the estimated HUF 600 “In the first half of to the invalidity of the regulate the provision of information billion−1 trillion costs of the year, bankers will use of the forex margin on lending and the transparent and the settlement will not and the unfairness objective pricing of household loans in hurt their 2015 balance sheets. In addition, banks have to work like crazy, of unilateral contract November 2014. The scope of the act had already set aside amendments. covers both newly disbursed loans and banks will need to some provisions prior to On the other hand, the the already existing portfolio. hire new employees act will greatly increase In January, the MNB published the the Settlement Act, and they might be able to free administrative formulas approved for calculating the to deal with the heavy banks’ burdens. “In the first half indicators and rates on its website. The some of those later. This could lead to a of the year, bankers will fair banking law locks in interest rate workload.” one−off elimination of have to work like crazy, spreads for loans under three years provisions in 2015 and banks will need to hire and requires lenders to use indicators, maybe the year after, too, noted Lovas. new employees to deal with the heavy approved by the central bank, to As the first MNB decree containing workload,” said Lovas. Another problem calculate rate changes for longer term the detailed rules was issued only in is that the act doesn’t provide a solution loans. The problem is that most clients
With the acquisition of MKB Bank and Budapest Bank, the share of Hungarian ownership in the equity capital of the banking system exceeds 50%, a threshold earlier set as a goal by Prime Minister Viktor Orbán. The sector will probably see further consolidation in the market. Raiffeisen and CIB Bank are most likely to exit the Hungarian market, according to press reports. Although Sberbank denies rumors that it plans to exit, it has recently announced the closing of some branches. The fight for the customers of the exiting banks has already started. Although banks in Hungary have been hit by various government measures and the adverse business climate, the decisions to exit have not been made locally, pointed out Lovas. Germany’s Landesbank BayernLB had been looking for a buyer for MKB for some time, as it was required to dispose of its Hungarian unit by the end of 2015 to comply with EU rules on state aid. GE sold Budapest Bank because it wants to dispose of its financial arm globally. Citigroup is exiting consumer banking in 11 markets including Hungary. Research institute GKI warns that the advantages of national ownership are not obvious, whereas the risks are pronounced. “The major danger of the state−owned banking system is that, in the absence of independent control, subjective factors play an important role in lending, and this makes the functioning of the banking system more risky; in the case of tensions, they need a capital injection by the state,” GKI said.
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04 News
Budapest Business Journal | January 16, 2015 – January 29, 2015
Demos: Unhappy campers lack leadership The rash of demonstrations that began in October, and are to continue with a February 1 protest, show discontent with the current government. But as long as they remain apolitical, these demos are unlikely to bring about change, analysts say. The past few months have seen a host of demonstrations, bringing thousands onto the street to protest the policies of Hungary’s governing Fidesz party. For organizers, the strength of these demonstrations has been their lack of endorsement by a single opposition party, an indication that these are apolitical and spontaneous outpourings of discontent. But analysts say the lack of political connections is also a weakness: Without leadership, analysts say, the protests are not likely to lead to dramatic change. The first of the recent series of demonstrations took place on the evening of October 26, when an estimated 40,000 people marched down Andrássy to protest plans to levy a tax on internet traffic. Two days later, a second demonstration drew an estimated 100,000, and shortly afterwards the government, obviously surprised by the turn of events, shelved the plans for the new tax. Intoxicated by the success of these first demonstrations, general protests by different organizers against the current political elite started flourishing, bringing thousands of disappointed Hungarians to the streets. The question political analysts ask is how effective these protests can be if they remain apolitical. “There is a huge tension between the protesters and the organizers of the demonstrations,” political analyst Zoltán Somogyi told the Budapest Business Journal, explaining that organizers are wary of opposition parties but demonstrators seem to want a viable opposition. “While the organizers keep saying that they are fed up with the whole political elite of the past 25 years in Hungary, the protesters are clearly fed up with the reign of [Prime Minister Viktor] Orbán, and are eager to see a competent opposition”. According to Attila Juhász, chief analyst at the Political Capital Institute, “The demonstrations in Hungary are diverse, and although the organizers keep disassociating themselves from parties, the communities demonstrating consist of supporters of opposition parties.” Juhász believes, “The smaller demonstrations following the first internet tax demonstrations portray a general disappointment of Hungarian citizens regarding the government.”
Photo: MTI / Szilárd Koszticsák
CHRISTIAN KESZTHELYI
Demonstrators outside Parliament on January 10 call for protection of their right to assembly.
Government: Not in the interest of the country The government claims that the lack of a clear opposition indicates that these demonstrations are fruitless, and could potentially cause a problem. “The protests that have been going on since October 2014 are neither about the government, nor about the governance: They are about the internal struggles of the frustrated leftist opposition trying to take a new form,” the International Communications Office of the Prime Minister’s Office said on January 12, in response to questions from the BBJ. “Under the present geopolitical circumstances it cannot be in the interests of the country to allow political forces that are not willing to accept the results of democratic elections and that are still looking for solutions to their internal division to weaken the country.” MP Antal Rogán has even gone so far as to suggest that there should be an investigation into the demonstrations, to make sure that they are not supported by forces that are seeking to harm the country. He said on HírTV on January 10 that such an investigation could take place as part of an “action plan for the defense of the country”, which incorporates various elements, including anti−terrorism measures and measures to defend the sovereignty of the Hungarian economy. But, for now, the marches can go on. In December, Fidesz MP Gergely Gulyás suggested in an interview with Hungarian daily Népszabadság, that, in his opinion, the laws and regulations on freedom of public assembly needed to be changed. This sparked plans for
“While the organizers keep saying that they are fed up with the whole political elite of the past 25 years in Hungary, the protesters... are eager to see a competent opposition”. another demonstration, but on January 7, a few days before that protest took place, László L. Simon, state secretary at the Prime Minister’s Office, said the Hungarian government has no intention of amending the law on freedom of public assembly, and would not seek new restrictions on public gatherings. Indeed, in its January 12 response to the BBJ, the International Communications Office of the Prime Minister’s Office said that the fact that the demonstrations have been allowed is an indication of Hungary’s strong democracy. “The protests of the last months reinforce the evidence for the fact that Hungary is a state of the rule of law, where everyone – civil organizations, parties, popular movements – has the inalienable right to protest and express their views; within the confines of respective laws no one can question these rights,” the office said. “The government is open to dialogue; it does hear and listen to the voices of the people, which is why we have initiated a national consultation on the use of the internet.” That consultation is supposed to take place some time this year, and is likely to spark more of the controversy that began the first demonstrations.
More protests on the way While the analysts disagreed with the government’s assessment, maintaining that demonstrators truly want change, they also said that, under current conditions, protesters will be hard put to bring about change. Although according to Juhász “it is sure that the opposition parties have lost credibility for the majority of Hungarians”, as long as these so−called “civil” demonstrations stay “apolitical” they will not be efficient. “If the movements that are openly against politics want to take effect, they will need to become political, which could hurt their attractiveness and their support would decline,” he says, so the way forward is not clear. Meanwhile, organizers are planning still more demonstrations. Zoltán Büki, MP of the opposition Együtt party, said he is acting as an individual – not a politician – as he calls for a March 1 road blockade all around Hungary in protest of the plans for increased road tolls. In a more typically apolitical demo, two different groups that have been behind past protests are planning to unite for a mass demonstration on February 1, the day before German Chancellor Angela Merkel is due to visit Hungary. “We are calling the citizens of Hungary onto the streets to send a clear sign: we do not agree with nor want to stand for the autocratic rule of Mr. Orbán and the Fidesz party. Since Mr. Orbán came to power in 2010 both the democratic and economic indicators of our nation are deteriorating,” an announcement for the demonstration said. As of January 14, more than 10,000 demonstrators had signed up to say they would join, by signing on to the event’s Facebook page (www.facebook. com/events/1518696825071835/).
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News 05
Budapest Business Journal | January 16, 2015 – January 29, 2015
No major fears over the falling forint Though the currency is near record lows, analysts see no cause for concern. CHRISTIAN KESZTHELYI
Ever since the forint weakened to 320.80 against the euro on January 5, market watchers have been waiting for the Hungarian currency to hit its historical record low of approximately 324. Nonetheless, analysts polled by the Budapest Business Journal seem cautiously optimistic about the forint’s future prospects – as long as external conditions don’t worsen. Gergely Pálffy, a foreign exchange analyst of Buda−Cash Brókerház, told the BBJ that, though the forint has been trading around 320 to the euro, there is no cause for
serious concern. “The forint can worsen further to the euro, reaching 324 as in the beginning of 2012, or even weaken to 330,” Pálffy said. “The most important question is how the National Bank of Hungary (MNB) will react to the changes on the foreign market — the slackening of the European Central Bank and the tightening of the U.S. Federal Reserve.” K&H Group Chief Analyst Dávid Németh said, “More and more people anticipate the forint will fall below its historical low of 324 to the euro, and many envisage it to fall as far as 330. The international mood inevitably is heading towards the weakening of the forint, but I believe that the lowest the forint can get is around 324. As the causes of a weak forint do not seem to be changing, I believe the forint can stay weak for weeks,” Németh said. Low interests rates, the commitment of
the government and MNB towards a weak forint, and Hungary’s sensitivity to external shocks due to the still high state debt could all keep the forint weak according to Németh. But, the “phase out foreign exchange loans, current account and the capital account surplus and the transition of real convergence towards the eurozone could definitely strengthen the forint,” Németh added. “The fall of the forint can stop this year and stabilize between 310− 320 to the euro,” he believes. He says the main reasons for the current situation are the Russian−Ukraine conflict, the fall of the oil prices, the elections in Greece and its possible exit from the euro, slowing the European economy as compared to the United States, expected interest rate decreases in foreign countries and insecurities around the bond buying program of ECB.
Pálffy, of Buda−Cash, added, “I believe that the fundamental background for the value of the forint is not in crisis, so I do not expect the current value to stay long.” That said, this year could see two major events that might significantly affect the forint’s stance. On the one hand, the ECB is expected to perform another note press, due to decreasing energy prices, which could strengthen the forint. On the other hand, the American Fed is planning to raise interest rates, which will decrease risk taking in Europe and could weaken the forint. However, if MNB Governor György Matolcsy’s expectations are fulfilled and rating agencies upgrade Hungary, then the effects of these two events would be less significant. The upgrade of Hungary could drive the forint back to 300 to the euro. According to Pálffy, the real question is whether Hungary is likely to be upgraded.
Analyst: CPI to stay low, but real deflation is unlikely
NEWS IN BRIEF Ombudsman aims to stop solar panel levy The ombudsman for future generations said on January 12 that he would initiate an amendment to the law regulating environmental product fees to make renewable energy related electric and electronic equipment exempt from the fee, Hungarian news agency MTI reported. The fees apply to solar panels and generators and control units in solar plants and wind farms under recently amended legislation that came into effect on January 1 of this year. The goal of the law on environmental fees is to support environmental conservation efforts and the reduction of pollution, deputy ombudsman Marcel Szabó said in the statement, pointing out that levying a fee on items used for renewable energy production runs against this goal.
State support for Audi suspended The HUF 40 bln in support offered by the Hungarian state to the Győr plant of German car manufacturer Audi has been suspended, Hungarian online daily hvg.hu reported. According to the daily, the suspension is due to Hungary officially informing Brussels in 2011 that it would pay Audi HUF 14 bln, while in fact it offered funding in the amount of HUF 40 bln. In September 2013, the Hungarian government officially informed Brussels about the revised amount. The European Union, however, declared the funding unlawful and unofficial. According
2014 came to −0.2%, which is the lowest figure since 1968. The dramatic drop of vehicle gas prices and the government’s scheme for reducing utility fees count as the main reasons for the unexpected drop in the consumer prices index, which was also fuelled by discounted prices during the holiday season, according to Tóth.
to hvg.hu, the Hungarian public only learned about the increased amount of support by chance, when the European Commission determined that it would begin an in−depth investigation in the matter. Both Audi and the Ministry of Foreign Affairs reportedly declined to answer hvg.hu’s questions regarding the sudden increase in funding.
“These factors and the current slide of the forint can amplify speculations that the National Bank of Hungary (MNB) will apply another interest rate decrease” Tóth added. Although analysts have recently voiced their expectations that the MNB will cut interest rates and the European Central Bank will launch its QE program,
both of which could be favorable factors for the forint, “considering the Fed’s anticipated interest rate increase, MNB’s cut can become risky”. Low CPI figures are expected for the future as “low vehicle gas prices are expected to last longer” and “the weakening of the forint, is also driving CPI down”.
Road-toll rage
European Court of Human Rights rules against Hungary in tobacco license case The Hungarian state has been ordered to pay László Vékony the equivalent in forints of €15,000 for damages and €6,000 for costs and expenses, in line with the ruling of the European Court of Human Rights for the Hungarian state’s violation of rules on private property when it cancelled the tobacco seller’s license and failed to award him a new one in a tender following the introduction of a state monopoly on retail tobacco sales, MTI reported on January 13. According to the court, the act had violated Article 1 of Protocol No. 1, which entitles natural and legal persons “to the peaceful enjoyment of his possessions” and prohibits the deprivation of those posses− sions “except in the public interest and subject to the conditions provided for by law and by the general principles of international law”. Vékony had been running a store that sold tobacco products for more than 16 years when his application for a concession under the new tobacco selling system was rejected by the state. Vékony alleged that discrepancies in the way different applications for the concessions were evaluated could only be explained by political connections. The Hungarian govern− ment is bound by the decision, and will pay the compensation, National Economy Minis− ter Mihály Varga said at a press conference.
Photo: MTI / Gergely Kelemen Zoltán
In light of the 0.9% decrease in Hungary’s December CPI figures, there is an increasing fear of deflation in the country, but this is unlikely to happen, Buda−Cash Analyst Gergely Tóth told the Budapest Business Journal on January 14. Prices have been dropping for some time, and the overall inflation figure for
Stands sell e-stickers for the toll road of M5 close to the Serbian border. New road tolls introduced in late December took effect as of January 1, and require drivers to buy county stickers to use highways. The measures have drawn wide criticism and sparked calls for a March 1 massive road blockade. In response, Prime Minister Viktor Orbán said the system is currently in a “test phase” and will be modified based on feedback and drivers’ experiences by the end of January.
BBJ
2Business Spar and Auchan say their development plans in Hungary are impacted by the same law that Tesco blamed for the closure of 13 stores. CHRISTIAN KESZTHELYI
The government on January 12 rejected Tesco’s claims that a new fee was forcing it to close stores in Hungary. “It is clear that the parent company of Tesco, headquartered in Great Britain, has recently been encountering problems that cost the company £260 mln and the recent downgrade by Moody’s, Tesco’s steep slide on the stock exchange and problems in the company’s leadership are more likely contributors to Tesco’s current decision than the Hungarian government’s market protection policy,” said Hungarian government spokesperson Zoltán Kovács.
Tesco reported on January 7 it was anticipating the layoff of 500−600 employees and closure of 13 stores as a result of new legislation that increased the supervisory fee the supermarket chain must pay to the Hungarian authorities by 60−fold. While the government said Tesco’s problems come from another source, other supermarket chains say they are hurt by the tax as well. On January 13, Spar told hir24. hu that the dramatic increase of the supermarket supervisory fee, introduced in November, has forced them to plan cutbacks in all areas. Prior to the fee increase, Spar had planned on investing €59 million in Hungary in 2015, but at present it will only open three stores to meet existing contractual obligations, the store said. Auchan CEO Dominique Ducoux told hir24.hu that the regulatory environment won’t have an impact on retail trends, but it’s likely to have an impact on investments, consumption and employment. Auchan has long term plans in Hungary, Ducoux added.
COMPANY NEWS Héviz-Balaton Airport passenger numbers reach 33,000 Passenger numbers at Héviz−Balaton Airport in western Hungary increased 18% to 33,000 in 2014, managing director Attila Benkő told Hungarian news service MTI January 13. Approximately 28,000 passengers traveled on large commercial aircraft, Benkő added. As 16,200 of all passengers were Russians, and the current situation in Russia is not promising, the airport expects slower growth this year, but says it is expecting at least 36,000 passengers.
Budapest Airport sees record traffic in 2014 In line with expectations, Budapest Ferenc Liszt International Airport saw a record number of 9,155,000 passengers in 2014, which is 7.5% more than the previous year, operator Budapest Airport announced on January 13. The numbers are better than the historical record of 8,900,000 set in 2011 before national carrier Malév was grounded. This year, Budapest Airport said it expects passenger numbers to rise as high as 9,600,000.
New Ford sales jump 37.8% in Hungary The sales of new Ford models in Hungary grew last year by 37.8%, well over the 21.6% growth of the market as a whole, Ford Central and Eastern European Sales told MTI on January 9. Sales of Ford LCVs increased by 42.7%, reaching 3,345 to give it a 16.1% market share. The majority of Ford sales in Hungary, more than 87%, were to companies, mostly SMEs, according to the report. The company anticipates a further climb in sales, at least by 10%, as much as overall vehicle sales are expected to rise, the unit told MTI. In line with estimates, revenue rose to HUF 60 bln last year from HUF 43 bln in 2013. There are 33 Ford brand dealerships in Hungary.
Audi turns out 2 mln engines in 2014 in Hungary The Hungarian unit of German car manufacturer Audi turned out approximately 2 mln engines last year at its factory in Győr, nearly 50,000 more than in 2013, Audi Hungária Motor revealed on January 9. The plant produced more than 135,000 cars last
Photo: MTI / János Vajda
Gov’t spokesman: Tesco layoffs not our fault
Tesco in Miskolc: Closures are on the way in shops like this.
year, an increase of 45,000 as compared to the preceding year. Headcount at the base increased by approximately 900 to reach a total of 11,300.
Chamber membership declines Some 555,000 companies paid their annual business chamber registration fees in 2014 – a decrease from the 595,000 paid the preceding year – Hungarian business daily Világgazdaság reported on January 13, citing Hungarian Chamber of Commerce and Industry Chief Secretary Péter Dunai. Despite the decrease, Dunai said he is satisfied with the results, taking into consideration that there are approximately 600,000 companies operating in the country, excluding food and farm businesses. Hungarian companies have been required by law to register with their local chamber of commerce and pay an annual registration fee since 2012.
MVM wins tender to transform heating plant to biomass fuel MVM OVIT, a unit of state−owned Hungarian electricity works MVM, won a tender to convert the heating plant of Tatabánya, west of Budapest, from gas to biomass fuel, according to an announcement in the January 12 official procurement gazette Közbeszerzési Értesítő. MVM OVIT was the only bidder. The contract is worth close to HUF 6.2 bln, and the project has won more than HUF 1.5 bln in grants. The conversion will create 41 new jobs at the plant, currently employing 100.
Angel investor backs out of BTel bailout Business Telecom (BTel) said late on January 9 that an angel investor who had promised to inject HUF 950 mln in the company had backed out, an act the board would not accept, MTI reported on January 10. The troubled telco was placed under interim management early in December, a month after it was announced the investor, Timur Rahimkulov, would inject HUF 950 mln in the company. Magyar Telekom is suing BTel for HUF 944 mln in unpaid bills, and a subscriber of the company’s corporate bonds has launched a liquidation procedure. BTel said on January 9 that Rahimkulov chose not to inject capital in the company due to information on its business and liquidity position that he became aware of only after committing to the capital raise. The board argued that the investor was aware when the commitment to raise capital in the company was made and said it would hold Rahimkulov to his contract. On January 7, the National Bank of Hungary (MNB) suspended trade in BTel’s shares and corporate bonds because of a violation of rules on extraordinary disclosures and fined it HUF 8.5 mln. It also ordered the firm to make an extraordinary announcement immediately but no later than one working day. On January 9, before BTel made its announcement, the MNB fined the company an additional HUF 5 mln for the same violation. On Saturday, the MNB lifted the suspension of trade in BTel’s shares and bonds from the start of the exchange day on January 10.
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2 Business
Budapest Business Journal | January 16, 2015 – January 29, 2015
07
Top-rated employers clearly value their workers The annual Aon Hewitt survey seeks to identify Hungary’s best employers, those who attract and keep talent by offering a long− term career path and motivation. According to the HR firm giving out the awards, these attributes, along with credibility, are essential in recruiting the best and brightest of Generation Y. LEVENTE HÖRÖMPÖLI-TÓTH
The first thing you see when you download the website of Provident Pénzügyi Zrt., the Hungarian branch of the multinational credit and finance company, is a big banner boasting of its winning Aon Hewitt’s Best Employer in Hungary award, for the second time. Also prominent on their website are links promoting careers within the firm. Microsoft Magyaroszág, the winner of the best Hungarian employer title in the 250−1,000−workforce range, is always trying to attract the best workers in a country where there is stiff competition for good programmers. These are firms that apparently appreciate the value of good employees, and will do what they can to keep those employees satisfied. Their pro−worker attitude has earned them the Aon Hewitt awards for 2014, and will also presumably help them in the competition for the best workers. Started in 2001, the awards are given out by leading HR firm Aon Hewitt after a comprehensive survey to find out which companies are the best employers in Hungary. Workers themselves were asked to rate their workplaces and to highlight what features make them exceptional. By now the survey has become an annual ritual. For the 2014 awards, announced at a ceremony in late November, 34,500 respondents gave their opinion on the subject. “One top aspect that constantly matters the most in people’s eyes is the competence of corporate leaders and whether they regard their workforce as their most valuable asset,” Réka Bakos,
“Generation Y persons collect firms in their résumé like cool gadgets or designer clothes. They also feel weaker emotional bonds and have a lower willingness to stay for long in one spot.”
Big winners in the small category: Members of Hilti Hungary, a firm that makes equipment for the construction industry, celebrate its Aon Hewitt award for best work-place in the 250 employees or less category in 2014.
“One top aspect that constantly matters the most in people’s eyes is the competence of corporate leaders and whether they regard their workforce as their most valuable asset.” senior consultant at Aon Hewitt told the Budapest Business Journal. Statistics underlie this phenomenon, as more than three−quarters of those working at the latest award−winning firms agreed that their executives share this value. “In 2014 the existence of a performance−focused culture gained in significance. Employees tend to appreciate ever more how they can be motivated and whether their business can offer an attractive perspective,” Bakos explained. Indeed, those that placed highest rewarded subordinates a lot more proportionately to their duties and responsibilities than average employers did. The capability to motivate in the long− term – and thus strengthen workers’ commitment – has also turned out to be of utmost importance. This alone can ensure sustainability. “Members of the so−called ‘generation Y’ find it crucial that they can identify themselves with a future perspective,” Bakos said. These Millennials, as they are also known, have a strong perception of employer brands. In Hungary that image has become increasingly important for the past 4−5 years, not least due to the
Best-rated employers in Hungary, 2014 Number of employees
First place
Second place
Third place
0-250
Hilti Hungária
Milupa−Nutricia
AbbVie
250-1,000
Microsoft Magyarország
Fundamenta Lakáskassza
SAP Hungary
over 1,000
Provident
Vodafone Magyarország
Source: Aon Hewitt Survey 2014
growing numbers of its representatives on the labor market. “Generation Y persons collect firms in their résumé like cool gadgets or designer clothes. They also feel weaker emotional bonds and have a lower willingness to stay for long in one spot. They might easily ‘finish off’ as many as 15 workplaces in their career, whereas their parents would have on averaged 6−8 only,” the expert added. Meeting the demand of such young titans will soon become the highest priority for the corporate world; by 2020, every second employee will be a millennial in Hungary. To them the credibility of an employer is a priority, just as it was for the bulk of those who participated in the survey. “The impression made to the outside is expected to match the reality inside the company. Only this way it is possible to attract and keep talent, which is the essence of success in the long run,” Bakos concluded.
Positive factors according to those surveyed Vision projected by company executives is shared by me. Our company establishes a fair and long term relationship with its partners and suppliers. Our company can keep its best talents. I am confident our company is going to do great in the long term. Senior executives set clear directions for the future. Massive resoureces are allocated to renew and update our services and product range.
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08 2Business
Budapest Business Journal | January 16, 2015 – January 29, 2015
Mercedes’ hottest model may be its school Dual training, a German form of education that merges theory and practice, is gaining ground in Hungary. Mercedes Benz is operating a flagship project in Kecskemét, where it is striving to train excellence while offering a full career path for students and workers. LEVENTE HÖRÖMPÖLI-TÓTH
Dual education, in which students receive practical, job−oriented training alongside the more theoretical subjects they learn in school, is a German import, so it is fitting that one of the initiators of this system of schooling in Hungary should be the Mercedes factory. Prime Minister Viktor Orbán and others in his government have promoted this kind of education as a model for the future. In Kecskemét, the future is already here. Many attribute almost mystical powers to dual training, which is seen as an antidote to overly abstract education. The reason the concept has earned such a solid reputation has a great deal to do with the fact that it has been in use in Germany for 42 years, and the economic development of that country would seem to speak for itself. Simply adopting a scheme won’t do it all, of course. But decision makers in Hungary would like to think they are placing a safe bet in following such a well− tested model. As has been recently stated by the Prime Minister, “the government aims to transform the entire Hungarian training system by dual logic.” Steps have already been taken in this direction. According to statistics of the National Labor Office (NMH), in the academic year 2013/2014 some 22,000 students finished a dual training program. In addition, half of the 100,000 or so who started learning a profession right after elementary school are involved in such a scheme. “It is free of charge, creates a connection with workplaces and the young can gain competitive knowledge as well as a guaranteed job,” says Róbert Komáromi, director of NMH, listing the advantages.
Mercedes pulls out in front Mercedes−Benz Hungary serves as a perfect role model to demonstrate the efficiency of the concept. First it launched a program for would−be craftsmen at secondary school level at its headquarters in Kecskemét in 2011. But since integrating an engineer into a company costs as much as the higher education, in 2013 it teamed up with the local College of Mechanical Engineering and Automation in order to get students engaged too. “Right now we have 126 persons involved in our dual scheme,
File this one under career experience: Young men at the Mercedes school in Kecskemét get practical training.
“In September our day care center for toddlers will open... and by establishing our own elementary school, we should be able to offer uninterrupted education from the age of eight months to 23 years.”
out of which 30 study at the college and the remaining 96 are completing their secondary level craftsman program in parallel,” Ákos Németh, director for education and training at Mercedes−Benz tells the Budapest Business Journal. Getting accepted is no cakewalk; it is not unusual for up to 240 students to apply for the 40 places available. The selection procedure starts with an interview in order to ascertain the potential commitment and expected loyalty to the company in the long−term. Applicants are then challenged in online tests and at an assessment center for a whole day where they are required to complete mechanical assignments on the spot, often as part of a group exercise. “So far less attention has been paid to the professional background or affinity: grades have mattered more. From now on, however, we will move towards providing a full career path.
In September our day care center for toddlers and our kindergarten will open, and by establishing our own elementary school, we should be able to offer uninterrupted education from the age of eight months to 23 years,” Németh says. “Part of it will be preparation for the baccalaureate too, so just because someone goes on to do craftsman’s training at 14 should not mean they could not continue in college if they wish and are able to.” This approach is to guarantee the best professional output.
No fear of losing loyalty Some believe that dual training should also be introduced at master’s degree level. In this regard die−hard scientists and researchers would be encouraged to work on projects that are most wanted by industry. That aspect, however, is irrelevant for Mercedes at the moment.
“This makes sense only in factories where there is research going on, such as at Audi in Győr. You also need a university as a partner, but in Kecskemét we are under contract with a college,” Németh points out. Even though the priority is specialists for its own purposes, Mercedes regards itself as a regional training center as well, with a particular focus on meeting the demands of suppliers by following the German standards. “The number of professions taught could go up from the existing four to eight, but the stakeholders need to be surveyed beforehand to establish which those professions should be,” the director adds. But what if these in−house trained professionals turn their backs on their mentors and end up working in Germany, maybe even for the competition? Apparently, this scenario gives the Mercedes executives no sleepless nights. The plan is to send students for two− to−three months to work for Daimler in Stuttgart anyway in the course of the total of seven semesters. “If they are asked to stay or return, we will be proud. And if they are recruited by some other carmaker, that’s also positive feedback. It is Mercedes’ task, after all, to offer conditions that make people loyal,” Németh says.
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2 Business
Budapest Business Journal | January 16, 2015 – January 29, 2015
09
AmCham signs strategic pact with government The agreement, designed to increase U.S.− Hungarian business, came just as there was an announcement of a new pact with Oracle and other new American investments.
About the agreement According to AmCham the strategic partnership agreement signed with the Hungarian Investment Promotion Agency has four goals:
ROBIN MARSHALL
The presidents of AmCham and the Hungarian Investment Promotion Agency signed a strategic partnership agreement on January 12, with the goal of improving bilateral trade, increasing the number of Hungarian suppliers to American companies in the country, and boosting the activities of chamber member companies here. And there was immediate news of motion toward those goals. In a speech delivered after the signing, Foreign Minister Péter Szijjártó announced that the government would, in the very near future, sign its 53rd strategic partnership agreement with a company, the American tech giant Oracle Corporation, bringing the total of SPAs signed with U.S. businesses in Hungary to ten. He also mentioned three new U.S. investment projects, to be announced in the coming weeks, which he said would be worth a
“In your daily operations your experiences are mainly positive – if they were not so, you would not have decided on future investments.” total of $15.5 million and generate more than 500 jobs. The agreement was signed by Ferenc Pongrácz, on behalf of AmCham, and Róbert Ésik, for HIPA, at a ceremony at the Kempinski Hotel Corvinus Budapest. The AmCham president described it as a “milestone agreement” that confirmed a “common goal to foster the U.S.− Hungarian economic relationship”.
Meaningful manifestation Ésik said he hoped the document would become “a meaningful manifestation of trust between the U.S. and Hungarian economies”. Up to the end of 2013, some $90 billion had been pumped into the Hungarian economy as foreign direct investment, he said. Of that total, about 10% came from American companies. Of the top 50 American multinationals, 40 are present in the country, Ésik noted. He added that the investment promotion agency was currently working on 98 projects, 11 of which are with American companies that, if successfully closed, would create 2,000 jobs.
Hungary’s foreign minister Péter Szijjártó speaking at the AmCham ceremony celebrating the U.S.-Hungarian economic relationship. Foreign minister Szijjártó told AmCham delegates, “Continuous consultations with members of U.S. businesses here in Hungary have always been very high on our agenda.” In an apparent reference to last week’s terror attacks by radical Islamic militants he said, “We need to form strong alliances; we need tight cooperation with our allies; we need to unite our strengths because together we are much stronger.” Szijjártó said that, in the fields of defense and economic cooperation, Hungary and the United States had “excellent” relations, but he acknowledged problems at the political level. He maintained that it is in Hungary’s interest to resolve such issues as quickly as possible, because “the success of Hungary’s foreign policy and external economic strategy depends on balanced relations”. And here Szijjártó called for help from AmCham members in sharing their findings of life in Hungary. “In your daily operations your experiences are mainly positive – if they were not so, you would not have decided on future investments,” he said, adding that such positive feedback would “hopefully help convince all those who have influence that their concerns regarding Hungary are based on misinformation.”
Political stability Drawing a veil over increased supermarket supervision fees and the ban on Sunday shopping, the proposed internet tax (dropped only after a series of mass public protests), and the new additional county motorway passes, all introduced suddenly and without warning, the foreign minister insisted that the government represented “political stability”. Szijjártó pointed to record employment at 4.15 million people (the target is five million, on a par with the Czech Republic, he said), and the fastest dropping unemployment figures in Europe (now at 7.2%, down 4.3% since Fidesz first took power in 2010), and the
“Continuous consultations with members of U.S. businesses here in Hungary have always been very high on our agenda.” fact that 2015 promised to be the third consecutive year of economic growth for Hungary. Having successfully brought down utility costs for the public, the next target was to do the same for businesses, said Szijjártó. “We would like to reach the level of energy prices in the United States, which are much lower than in Europe.” The minister also mentioned the potential for the Transatlantic Trade and Investment Partnership (T−TIP), currently being negotiated between Brussels and Washington, to be the “most significant agreement on global trade ever”, though he added that it was vital negotiations be “as transparent as possible” to build public trust.
1) Further develop economic relations between the U.S. and Hungary under the terms of mutual trust and predictability. 2) Reinforce the participation of AmCham and American companies in improving the capacity and international competitiveness of the Hungarian economy. 3) Seek to increase the proportion of Hungarian suppliers to American− owned companies in Hungary and increase Hungarian added value. 4) Promote the expansion of production and development activities of AmCham members and American companies in general for greater integration into the national economy within the framework of relevant regulation. An SPA had earlier been signed with the Ministry of Justice in November 2014, giving AmCham the opportunity to comment on draft legislation before laws are passed. That agreement was a renewal of one signed in February 2011, the first such signed between the government and a business association. Bilateral trade is clearly in good shape, the minister said, pointing to a 25% growth from 2012 to 2013. Data from the first ten months of 2014 showed further growth of 12.4%, with Hungarian exports to the United States up 24.6% in the same January−October period. “This proves that goods and services produced here in Hungary are competitive under fair trade conditions.” After the event, U.S. Embassy chargé d’affaires Andre Goodfriend tweeted “Over lunch, among other things, discussed St. Stephen’s advice http://goo.gl/e3eJXa about the benefit of diversity http://goo.gl/ hnJBGP” in an apparent response to the calls by Prime Minister Viktor Orbán for Europe to end economic immigration.
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2 Business
Budapest Business Journal | January 16, 2015 – January 29, 2015
Trucking magnate named EY Entrepreneur of the Year CEO György Wáberer breathed new life into an old Hungarian firm to develop one of Europe’s biggest road transportation firms. His latest accolade was awarded in December. BBJ STAFF
György Wáberer (58), the founder, co-owner, Chairman and Chief Executive Officer of Waberer’s International Zrt, was named EY’s World Entrepeneur of the Year in Hungary for 2014 in December. Starting by privatizing the Hungarian firm of Volán Tefu, Wáberer built up one of the biggest road transportation companies in Europe. Waberer’s International Zrt. is the leader of international transport, road freight and logistics both in Hungary and Central and Eastern Europe. The firm currently employs 5,200 people with a fleet of 3,200. Its vehicles travel three times the distance between the Earth and Moon annually. The interests of Wáberer include Waberer’s International Zrt, which is one of the most significant international road freight companies in Europe, the Intermodal Logistics Center of Budapest (BILK), which is the biggest logistics center in Central and Eastern Europe, and several significant entrepreneurships, including the Wáberer Hungária Biztosító insurance company. Subsidiaries of Waberer’s International can be found in the United Kingdom, France, Germany, Romania, Slovakia and Poland. After acquiring degrees as an engineer and systems analyst, Wáberer started his career at Volán no. 3, Volán Elekronika and Volán Tefu Rt. in 1986. He decided to privatize Volán Tefu in 1994. The company was offered for privatization twice, but having a debt of HUF 1.5 billion and an annual loss of HUF 500,000 million nobody entered the tender. But Wáberer recognized the mistakes of the management and had a clear vision of how to make the company profitable again. Therefore, with a few of his companions he sold all his belongings and applied for a grand debt in order to enter the tender for the majority stake of Volán Tefu. Wáberer became CEO of the company and within three years was able to pay back the debt of the company and made it profitable again. Volán Tefu grew and acquired many of its competitors. Wáberer integrated more than 30 companies in the last two decades, including, in 2002, Hungarocamion a trucking company with a fleet ten times that of Volán Tefu. Wáberer has been influential in shaping the industry and its regulations in Hungary and is also active in charitable and cultural giving. He received the Civilian Knight’s Cross of the Order of Merit of the Republic of Hungary in 2005 and the officer’s cross in 2009 as a recognition of his
performance. In 2005, Earnst&Young awarded him for being a “brave entrepreneur”, and the Hungarian Manager’s Association declared him to be the Manager of the Year in 2007. He spoke to the Budapest Business Journal about his company and his plans for the future. BBJ: Throughout 2014, your company has purchased more than 1,000 vehicles and added hundreds of workers. Can you give us an idea of how many people Waberer employs in Hungary and worldwide? G.W.: Our company employs 5,200 workers, including more than 4,000 professional drivers. More than fourfifths of our employees are Hungarians. Our foreign employees are chiefly drivers or operators. BBJ: Can you give an idea of the size of the company’s fleet and how big its logistics center holdings are? G.W.: The fleet of Waberer’s International Zrt. consist of 3,300 selfowned environmentally friendly vehicles classified as Euro 6 and Euro 5. These vehicles complete an annual 1.2 million freight orders with a freight performance of 6 billion ton/kilometer, traveling a total of 500 million kilometers. Our fleet is the youngest in Europe with an average age of two years. Waberer’s vehicles are fitted with the most modern transport safety equipment, on-board computer, ABS, disc brakes, EBS stabilization, intelligent tempomat and integrated air conditioning. The company is continuously reducing the fuel consumptiuon of its trucks. The fleet’s fuel consumption per 100 kilometers was reduced by 3% in the first half of 2014 year-on-year. As the trucks of the company travel approximately 500 million kilometers in Europe, in 2014 the trucks saved millions of liters of fuel and reduced their carbon footprint by 10,000 tons compared to the same period of the previous year. Intermodal Logistics Center of Budapest (BILK) is one of the biggest logistics centers of Hungary offering logistics services with more than 153,500 sqms of warehouse and 17,500 sqms of office capacity. BBJ: Are there economies of scale in the sector that help logistics firms as they grow larger? G.W.: Economies of scale is one of the most important efficiency factors in the sector. Ever since the start of the economic crisis, companies grab every opportunity to be more economical. The tight competition decreases the fees of freight and logistics services. The companies in the market work with an extremely low profit margin of a couple of percentage points.
György Wáberer with his award.
Waberer’s is currently the third biggest road freight company in Europe with its own asset truck-trailers. The size of the fleet allows the company to do high-volume businesses to reach better purchases, which makes for more affordable prices compared to what is possible for our competitors. The company generally orders trucks, trailers, tires and fuel supplies in the thousands. BBJ: Where is your firm’s biggest market? Where do you see the biggest growth coming this year? G.W.: The biggest market for Waberer’s is Germany, as almost one-quarter of our revenue is generated there. The vehicles load and unload in Germany an average of 1,200 times per week, employing 700 trucks. There is a continuous growth in the services of Waberer’s in the United Kingdom and France. To serve these markets better, in 2014 the company opened subsidiaries in each, in order to better live up to our potential. The Dutch and Italian markets are also promising, therefore Waberer’s will open subsidiaries there in 2015. The company expects the volume of the German market to further rise in 2015. BBJ: What are the trends you are seeing in logistics in Europe? What about Hungary? Is the country
well-positioned as an East-West logistics center? Are sanctions against Russia having an impact on that business? G.W.: With its own own asset fleet, Waberer’s offers freight services in the European Union, while outside the borders of the EU, the company uses subcontractors. That is the reason why we do not feel the sanctions of Russia directly, although we do indirectly: The capacity released by the sanctions flood the European markets, further reducing freight fees and tightening the competition. Waberer’s acts against this situation by optimizing its services, automating logistics and raising the quality of its services. BBJ: What developments are you expecting, for your company and yourself, in the coming year? G.W.: I foresee the doubling of €452 mln in revenue by 2020. To do this, the company needs to achieve a doubledigit growth in traffic. These plans are ambitious but realistic: In the past ten years, with a few exceptions, the company was able to perform at an annual growth of 10%. Since 1994, the traffic of the company has grown 140fold. We are planning to further raise the headcount of the company and to open news subsidiaries in Western Europe. Along with organic development, the company also identifies acquisition targets in the European Union.
BBJ
3Special Report THE YEAR AHEAD
Forecast for 2015: Cooler than last year Official predictions may be more upbeat than others, but everyone seems to agree that growth in Hungary will not be as hot as it was in 2014. We look at the economic projections for the next 12 months. GABRIELLA LOVAS
When analysts look into their crystal ball for 2015, they see Hungary’s economy continuing to grow, although at a slower pace than last year and with increased downside risks. The main external threats noted include developments in the European Union, as growth and inflation in Europe are expected to remain low this year. Thus, the European Central Bank will probably launch a quantitative easing program, which involves the purchase of government bonds. On top of slow growth, highly indebted governments and weak banks, the recent developments in Greece and their potential impact on the eurozone are also worrying. The escalation of geopolitical tensions in Russia, Ukraine and the Middle East are also among the greatest threats cited by analysts. The unpredictable path of the price of oil creates further uncertainties for businesses.
Slower growth The 2015 budget, which reflects the government’s official expectations, assumes GDP growth of 2.5% this year. However, National Economy Minister Mihály Varga has already said that oil prices below $60 per barrel could raise Hungary’s 2015 GDP growth rate by as much as half of a percentage point above the official forecast. As usual, the official projection is more optimistic than most other forecasts. Even the central bank (MNB) projects somewhat lower growth, at 2.3%. The MNB says in its December Inflation Report that economic growth will primarily be driven by domestic demand rather than exports in 2015. “Improving labor market conditions, low inflation, accommodative monetary conditions and easing prudential considerations due to the conversion of foreign currency loans will all support growth,” claims the central bank. The government and the MNB both expect a 2.8% increase in household consumption. According to the forecast of research institution GKI, GDP will grow by only 2% this year, as the factors contributing to the dynamic growth in 2014 are fading away.
Hard to repeat: The Hungarian unit of German car manufacturer Audi announced this month that it turned out approximately 2 million engines last year at its factory in Győr, nearly 50,000 more than in 2013. Keeping up that pace in 2015 may be a challenge.
The implementation of carmakers’ capacity expansions and investments gave a huge impetus to industrial growth last year. However, the industrial statistics of the past few months show that this effect has been slackening. These involved the favorable European business cycle, a surge in investments financed by EU funding and a reduction of utility costs intended to boost purchasing power. In addition, Hungary’s international assessment is said to be deteriorating further due to the government’s economic policy of nationalizations through acquisitions, anti−market measures and suspected corruption. Buda−Cash analyst Gegely Tóth sees a considerable slowdown in Hungary’s economic growth from last year’s figure of more than 3% to 2.2% in 2015. The implementation of carmakers’ capacity expansions and investments gave a huge impetus to industrial growth last year. However, the industrial statistics of the past few months show that this effect has
been slackening. As no such grand projects will be implemented this year, there is no reason to expect the continuation of last year’s dynamics. In 2015, Tóth expects industrial growth of 5%, tops. He agrees that growth will be driven by domestic demand, although he doubts that this alone could compensate for the slowdown in other areas. Another cardinal question is how active the private sphere will be this year. Market−based investments and jobs have shown some increase, but it is far from sufficient, yet. Tóth expressed concerns over the expected performance of the agricultural sector, too.
Subdued inflation The MNB’s inflation forecast for 2015 is at around 0.9% with inflation remaining negative in the months immediately ahead and then gradually rising from the first half of 2015. The low figure can be explained by cost−side factors, such as the low price of oil, regulated products and imported products. Inflation in the euro area, Hungary’s main trading partner, continues to be low, thus external inflationary pressures will remain subdued. In comparison, the GKI’s inflation projection is around 2%, as with the weakening impact of the utility price reduction and tax increases, prices are set to increase in 2015. In contrast, Buda− Cash expects inflation to remain subdued, at around 0.7% this year. Tóth believes that
after the regulated utility price cuts slowly disappear from the base, market−based utility price cuts, namely the falling oil prices, will keep the rate down. This, in turn, could theoretically increase the central bank’s room for maneuver for further base rate cuts. Tóth warns that due to developments in the external environment, extra caution is needed with respect to monetary policy.
Decreasing unemployment The central bank projects a slight decrease in the unemployment rate to 7.6% in 2015. As a result of low inflation, wage dynamics in the private sector may remain moderate in 2015. GKI points out, however, that the growth rate in the number of “genuine” employees, including only those who are working in Hungary and excluding public workfare schemes, is significantly smaller than what official statistics show. In 2015, the research firm expects employment to grow by 1%, and the unemployment rate to be 7.5% due to the further expansion of public workfare schemes and the almost complete elimination of social support. All stakeholders agree that fiscal policy remains committed to maintaining a low government deficit level, and thus it should remain below the 3% target. The ESA deficit is expected to reach 2.4% of GDP in 2015. However, public debt will continue to decrease at a snail’s pace, analysts say.
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Budapest Business Journal | January 16, 2015 – January 29, 2015
Confidence up in property markets This year is likely to see a continuation of the real estate recovery that began in 2014. DAVID LAWRENCE
Continued increases in office demand and falling vacancy – combined with rising investment activity across all commercial real estate sectors – is predicted for 2015. A wide range of investors are now active or considering acquisitions in Hungary, including foreign funds, many of which have not been present since the 2008 economic downturn, in addition to a growing number of Hungary−based investment funds. Still, the more conservative European funds have not returned to Hungary. Concerns remain over the political environment and office development is very limited with a relatively low supply of well located, class “A” large floor areas to meet perceived growing demand.
Office Against the background of the 2008 economic downturn, high vacancy and weak demand, it has been equity−rich developers and those able to source finance and meet pre−lease requirements from lenders that have been active in the Budapest office market. Delivery for the year will be low as completion for 2015 is predicted to be only 68,000 sqm in two projects. From a positive perspective it is only quality projects in a good location that are going ahead. Green accreditation has now become the norm for high quality office developers. “Banks are very selective regarding the financing of speculative developments and therefore the barriers to market entry are higher,” commented Zoltán Radnóty, CEO of HB Reavis Hungary. The prolific Slovak−based CEE developer delivered the 21,000 sqm Váci Corner last summer in the popular Váci út business district. It has been awarded a BREEAM Excellent accreditation. Delivery pipeline for 2015 is limited to the 18,000 sqm second phase (Building C) of Váci Greens by the Belgium Atenor Group and the 6,000 sqm Erzsébet office center, 100% pre−let to Groupama. “Having fully leased the first phase we are continuing with development,” said Zoltán Borbély, Project Director at Atenor Hungary. The fully completed project will consist of five buildings with 100,000 sqm of space. With regard to the longer pipeline, having concluded a 8,500 sqm pre−lease for its V17 office project in Váci út, Hungary’s Wing has
Promising developments: Prologis Park, above. Below is Váci Greens. gone ahead with development of the 12,000 Industrial sqm office project, due in mid−2016. The pre−2008 crisis warehouse and Another prolific European developer, logistics development boom was boosted Skanska Property has commenced by speculative projects and the question construction of the first 6,600 sqm phase remains as to when industrial developers will of Nordic Light, its seventh Budapest office again construct on a speculative basis. In response to market conditions, project, due to complete in the first quarter of 2016. The two−phased 26,200 sqm developers in Hungary are still pursuing development in the Váci út cautious built−to−suit business district has been development strategies. pre−certified with LEED Although Prologis, for “Banks are very green certification. example, has speculative Last year saw a record selective regarding the developments in Poland, gross Budapest office Czech Republic and financing of speculative the take−up of around 450,000 Slovakia, development in sqm. Demand is strong Hungary is still limited developments and from shared service centers to built−to−suit. “New therefore the barriers speculative construction and governmental bodies and vacancy could fall to been absent from to market entry are has 15% in 2015 according to the Budapest market Gergely Padós, Managing for two years. This has higher.” Director of Cushman & helped somewhat in Wakefield Hungary. This the rebalancing of the could put upward pressure on rents. market and the decreasing vacancy rate, “With a view towards the limited supply but has resulted in a scarcity of large floor and the opportunities this presents, some plates, which in turn limits the immediate projects could be re−positioned as there is a materialization of larger requirements. need for space to deliver quickly,” commented Occupiers are therefore turning to the built− Mike Edwards, Head of CEE Advisory & to−suit environment in search of solutions, Valuation at Cushman & Wakefield. JLL especially for long−term requirements,” said put prime rents at €20 per sqm per month. Cushman & Wakefield. At the end of last year the size of modern However this is only achievable for a few select buildings. Average rents stand at industrial stock in Budapest and its €11−14 per sqm per month. Many analysts surroundings was 1.85 million sqm, with argue that the recorded vacancy rate is not high vacancy falling to 19%, the lowest level a true reflection of vacancy in Budapest in six years; this is expected to continue to and recorded stock should be rationalized, fall in 2015. “The industrial sector is in a as there are a number of outdated first state of change,” said Domonkos Joó, Head generation buildings from the 1990s that of Industrial at DTZ Hungary. “Although the should be taken out of the equation. vacancy rate is still high, only a handful of schemes can offer large contiguous modern warehouse space.”
Investment Commercial real estate investment volume for 2014 reached €650−700 million, the highest level since 2007 according to CBRE and the indications are that this is part of a trend of international investors returning to Hungary. A number of big−ticket office and industrial transactions are expected to complete in early 2015 as investment volume is forecast to be around €700 mln. Cushman & Wakefield put the 2015 total at
€600 mln. “With regard to this year’s deals, I can already identify €300−400 mln that will probably trade but that is just the tip of the iceberg. Last year saw €600 mln traded and with increasing activity I can envisage an increased volume of at least 25% on this,” said Edwards of Cushman & Wakefield. Skanska Property Hungary has sold the 17,800 sqm Green House office center to the Hungarian open−ended property fund, Torony Real Estate Investment Fund managed by Diófa Fund Management, a member of the FHB Group. The deal is generally regarded as a significant step in the recovery of the investment market in that an income−producing class “A” office center by a major international developer is the subject of an arm’s length investment transaction. The deal also reflects the growing number of Hungarian funds that are active in the investment market. Another Hungarian fund, the Erste Open−end Real Estate Investment Fund has acquired the 11,000 sqm north wing of Futureal’s recently completed Vision Towers office center. Interest is also extending to the retail sector, as the Dutch ING Real Estate has completed the sale of its remaining 50% stake in the 47,000 sqm Allee shopping center in Budapest to a Nationale−Nederlanden fund for a reported €95 mln. In the logistics sector, Blackstone acquired the Tulipan logistics park for Logicor, its European logistics platform. This is seen as a significant development in that Hungary is now included in regional logistics portfolio acquisitions. Hungary is continuing to provide a yield premium on Poland and the Czech Republic. Although further compression is expected, JLL put prime yields at 7.25% for office, 7.25− 7.50% for retail and 9.25−9.50% for industrial. Although the German institutional investors have deep−rooted reservations about Hungarian politics and are therefore not expected to return to Hungary immediately, on the positive side money from the Middle East and U.S. private equity and domestic funds seem to be in a position to take up the slack, according to Edwards. “International capital will return in earnest in 2015. At least one very significant deal is expected to close in the first quarter,” he said.
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Budapest Business Journal | January 16, 2015 – January 29, 2015
Ukraine: Continued clouds in the forecast Analysts expect the poor situation on Hungary’s eastern border to continue in 2015, but they say that the effects on our country will be limited, with serious impacts in a few specific areas.
“It seems unlikely that the Russians would shut down their pipeline, because they would deprive themselves of the income if they do so.” channeled those reserves into different areas instead of improving the efficiency and technological level of the gas industry. Now, with fuel prices falling, Russia is suffering.
ANDRÁS ZSÁMBOKI
When they look at the Russia−Ukraine conflict, analysts see continued political turmoil causing continued economic headaches, but the situation is not expected to have a major impact on Hungary, whose main trading partner is the European Union. Still, analysts do expect some bigger problems for a few specific companies. “The Hungarian economy is fairly independent from the Russian market. A mere 3% of the country’s exports come from cooperation with the Russian economy,” explains András Deák, senior expert at the Institute of World Economics (MTA/HAS). On the other hand, there are some areas that are heavily dependent on the Russian connection. “The fact that Russia lost her financial strength/reserves in the Ukrainian conflict can have a huge impact on the Hungarian energy sector as well as on other industries such as financial services and pharmaceuticals,” Deák adds. Russia’s biggest strategic energy project, the South Stream pipeline, has been shut down, due in part to diplomatic pressure, but mostly due to a lack of funds, analysts say. “It might well happen that the Hungarian nuclear power plants expansion will end up the same way.” While it seems unlikely that Russia can come away from Ukraine with a complete win, it is unlikely to walk away soon. “The only way to solve this situation fast is to restore the status quo ante: withdraw the non−regular Russian armed forces and give back the annexed Crimea to Ukraine. That second part, however, seems impossible since the current populist−nationalist Russian leadership cannot afford to do it without losing face,” Péter Tálas, Professor of Geostrategy at Budapest’s National Defense University tells the Budapest Business Journal. “In the mid−term, we have to reckon with a long drawn−out conflict between Russian and Ukraine.” The lesson of the Russian−Ukrainian conflict is that Russia’s most vulnerable area is financial. “This is a structural problem: Russia is a strong country but she is financially not modern enough,” Tálas explained. In addition, the Putin regime has not focused enough on technological modernization. “Russia continues to fail at diversifying natural gas and petroleum sales,” Tálas says. From the income of natural gas sales between 2002 and 2008, Russia built up significant reserves; however, they
OTP, Richter From the Hungarian perspective, analysts say that the biggest corporate victim of the Ukrainian conflict is OTP Bank. Its exposure is via its Russian and Ukrainian subsidiaries. Through them, OTP handed out more than HUF 1.5 trillion worth of bank loans. Furthermore, both in Ukraine and in Russia, most of the loans are consumer loans and not mortgage loans. “They were easier to grant, but they are harder to collect,” remarked Ákos Kuti, head of research at brokerage house Equilor. However, it would be time to start encashing now. Financial difficulties have affected the Russian middle class rather heavily; a lot of households find themselves in difficult situations. “By sliding into recession, the Russian economy may well cause a serious social crisis,” explains András Deák, a foreign relations expert. The nonperforming loans of OTP’s Ukrainian subsidiary have already reached 25%. In the case of the Russian subsidiary, that ratio has reached 20% and is likely to sharply increase in 2015. “OTP used to work with 30−40% APR in the case of consumer loans both in Russia and Ukraine. They have included in the calculation people who are unable to pay, but that exponentially decreases repayment morale. In Ukraine, dollar− based loans were the most significant. “Because of that, the weakening of the hryvnia did not cause direct losses for OTP Bank. The debt service, however, causes a great deal of trouble for the debtors. Because of that, repayment morale is starting to really worsen now.” The Ukrainian and Russian subsidiaries of OTP Bank will produce significant losses; still, analysts find it improbable that OTP would withdraw from the two markets in the near future, not least because no one would want to buy a Ukrainian bank these days.
Richter swallows bitter pill In 2013, Russia and Ukraine together made up a 40% share in the market of the biggest Hungarian pharmaceutical companies, which decreased to 25% in 2014, and this year it will probably decline further, analysts forecast. The loss is due to the fact that Richter’s income is primarily in the ruble and hryvnia, which have gone through serious inflation over the past couple months. “Richter used to apply a currency hedging policy, but in 2013 it abandoned this practice – at the worst time
Although the conflict with Ukraine is economically damaging for Russia, it is unlikely to order a withdrawal of the non-regular forces it is believed to control there anytime soon.
“Richter used to apply currency hedging policy, but in 2013 they abandoned this practice – at the worst time possible.” possible,” remarks Kuti. Nevertheless, it does not seem likely that Richter will leave Russia or Ukraine in the near future. “Ukrainian and Russian society is aging, so it is worth basing a future strategy on them,” Deák said. Moreover, Richter operates a pill packaging plant in Yegoryevsk, which proves Richter’s commitment towards becoming a long− term domestic producer in Russia.
MOL doesn’t suffer The gas trade from Russia does not affect MOL, although crude oil does predominantly come through the Druzhba (“Friendship”) pipeline. The Adria pipeline (connecting Hungary and the former Yugoslav states) is idle; it would take only a week to make it operational. The strategic reservoirs have enough supplies for 90 days. “Nevertheless, it seems unlikely that the Russians would shut down their pipeline, because they would deprive themselves of the income if they do so,” Deák explains. “If South Stream was being built, it would probably strengthen MOL’s bargaining position against Zagreb while negotiating about INA’s future,” Tálas says. “Now they cannot use that card, but this game wasn’t about the Russians anyway,” the professor adds. MOL does have oil fields in South Siberia and Kazakhstan. However, production in those areas makes up only 7% of the total 96,000 barrels per day. “It is improbable that the relationship between Russia and the EU would worsen to the point that it could jeopardize the concession rights of MOL.
Loans handed out by OTP and its subsidiaries Hungarian OTP loans: HUF 2.8 trillion Bulgarian loans: HUF 1.196 billion Russian loans: HUF 862 bln Ukrainian loans: HUF 628 bln Croatian loans: HUF 439 bln Romanian loans: HUF 431 bln Slovakian loans: HUF 361 bln Montenegrin loans: HUF 162 bln Serbian loans: HUF 96 bln (Source: OTP’s Q3 quarterly report 2014)
State policy impacted The Hungarian central economy policy has one more element that can be influenced by the Russian− Ukrainian conflict: namely the long− term agreement that determines the import price of natural gas from Russia, and which has to be renewed this year. “Hungarian wholesale gas importers’ position has strengthened; that fact, however, is largely independent from the Ukrainian crisis,” Tálas tells the BBJ. This strengthening can be explained by the fact that Hungary can offer its gas reservoir to Russia. “The Orbán government wants a special relationship with Putin’s Russia, but that scheme has hardly anything to do with the realities,” Tálas say. Firstly, Russia would not benefit too much from that relationship. Secondly, as Hungary will have to realize, the country’s main economic partner is the EU. But the flow of natural gas is unlikely to drop dramatically for Hungary, because Russia depends on the European gas sales. “That is why it is highly unlikely that Russia will stop transporting natural gas or petroleum to Hungary. It would cause great financial losses in the already impoverished Russian economy,” Tálas adds
BBJ
4 Socialite Memories of a Pannon Christmas Pannon Wine Guild’s tasting features a delicious crop of great wines.
Cabernet Sauvignon has become a rather untrendy grape in Hungary. It has been pushed into the shadows by the usually less fancied Cabernet Franc, which certainly excels in Hungarian terroir.
ROBERT SMYTH
Many of Hungary’s big name winemakers were out in force at the Pannon Wine Guild’s Christmas tasting, personally pouring some diverse and unique stunners along the way. From the Great Plain region of Kunság, Gábor Font’s aromatic, fruity Irsai Olivér 2014 and crispy Kékrankos rosé 2014 provided yet more evidence that good wines have been crafted out of the washout that was last year’s vintage. The question remains whether many big wines will appear from 2014, to which the answer is apparently “unlikely”, given what I’ve heard from a lot of winemakers. Vintners are likely to have put their best fruit forward into their basic wines and skipped the premium wines in the annus horribilis of 2014. The 2014 vintage was to have seen the launch of a united umbrella brand for Balaton Olaszrizling, under which winemakers of several of the lake’s regions planned to come together. However, this has now been postponed until the 2015 vintage. Fortunately we still have earlier vintages left to savor. Staying at Balaton, Badacsony’s indigenous Kéknyelű is a grape that had long seemed more trouble than it was worth. Not only does it need Budai Zöld or the related Rózsakő alongside it in the vineyard to be able to pollinate, it also struggles to yield the same quality vintage in, vintage out. However, give it time and patience and it can definitely repay with interest. Szeremley’s Kéknyelű 2006 from Badacsony is still in fine nick and actually in its prime. “There are white, rosé, red, sweet wines and mature whites,” says László Szeremley, when describing this wine and it certainly falls into the latter category. This is bone dry with a rich, oily texture and is very savory on the finish, with a bit of lemony freshness to show its still got some zip left in the tank to balance the intense aged notes. Other good Kéknyelűs come from Péter Váli, Zoltán Malik and Laposa Borbirtok.
Reestablishing Furmint A recent trend has been the rush to spread the prestigious Furmint grape well beyond its stronghold of Tokaj and Somló, or rather re−establish it once again, since it existed in many regions before the collectivism of the communist system took hold. From across the Romanian border in the region of Ménesi, which is close to
Making top dry whites: The Kovács Nimród winery in Eger. Arad, ethnic Hungarian Géza Balla noted that Furmint was once a prominent grape. But Romanian dictator Nicolae Ceaușescu saw that it was grubbed out due to its Hungarian association. Balla’s first effort, Furmint Sziklabor 2012, was definitely a bit oaky, despite being made in second− fill 500−liter barrels, but it oozed those unique Furmint quince aromas, and is a certainly a good first effort. It actually reminded me of the first Furmint release from Eger’s Kovács Nimród winery a few years back, which has now become a real player. Indeed, the Kovács Nimród Nagyegedi Furmint 2011 recently saw off many top Tokajs and the rest of the dry white field to emerge as the best overall dry white from VinCE magazine’s blind tastings of 2014. Over in Somló, Imre Györgykovács showed a remarkably complex dry Furmint from 2012 that certainly was more about the terroir than the grape with its focused oily texture and very long stony, savory finish. It contrasted nicely with his Hárslevelű 2012, which had a looser structure but was also very impressive, and indeed stony. Both had enough acidity to give the wines freshness despite the low acidity that characterized the 2012 vintage, even in Somló where abundant acidity is normally a given. Generally speaking, I wouldn’t leave 2012 dry whites too long due the hot and dry vintage starving the wines of the acidity they need for a long cellar life. While 2011 was also hot and dry, there was plenty of water left in the soil due the intensely wet 2010. Over in Eger, Tamás Pók showed Furmint and Hárslevelű together in his Rigópohár 2011, which revealed complex notes of lemon grass, green herbs, fresh and candied citrus fruit
and flowers. This wine used to carry the names of the two grapes but Furmint is apparently no longer recognized by the local wine board, hence the creation of the new moniker. Pók planted Furmint from cuttings provided by Tokaj legend István Szepsy in 2004, placing them alongside Hárslevelű in the Pajdos vineyard, which consists of brown forest soils of loam and clay over volcanic rhyiolite tuff bedrock. (Permission was given for Furmint to be planted alongside the established varietal of Hárslevelű in the region for experimental purposes.) It makes sense to blend the two together in dry whites as they’ve long complemented each other brilliantly in sweet Tokaji Aszú. Incidentally, Pók was earlier Nimród Kovács’s winemaker, and now seems to be thriving pursuing his own brand of natural winemaking. Interestingly, his former employer’s aforementioned Furmint is actually labeled as such.
Kékfrankos at its best On to a few of the reds. Péter Vida’s Hidaspetre Kékfrankos 2011 from Szekszárd is a prime example of Kékfrankos at its best: medium−bodied but with really lively red fruit, especially the region’s signature (for me anyway) Morello cherry, and vibrantly playful acidity. This is a great option to take as a gift if you’re travelling as it’s less than €10 a bottle at the Heinemann Duty Free store at Budapest airport. The Vida contrasted with the more powerful Kékfrankos Reserve 2012 from fellow Szekszárd producer Takler. Kékfrankos has come on leaps and bounds in the last couple of years and it is so important that this Central European grape is at the forefront of the
local red wine scene, as it is in neighboring Austria. The Austrians have shown just what great things this grape is capable of with Blaufrankish from the Burgenland. One Szekszárd Kékfrankos that captures the sophistication of the Burgenland is Heimann’s Alte Reben 2012. It is also good to see that Takler and Heimann put some Kékfrankos into their respective flagship Bordeaux−based blends Regnum and Barbár. Another positive trend is that Villány vintners are putting much more effort into this grape, and the results are so far deliciously encouraging. Meanwhile, the French−cum− international varietal Cabernet Sauvignon has become a rather untrendy grape in Hungary. It has been pushed into the shadows by the usually less fancied Cabernet Franc, which certainly excels in Hungarian terroir, though just occasionally a real stunner shows up that shows us what Cabernet Sauvignon can do. Ferenc Vesztergombi’s Cabernet Sauvignon 2012 is really full−bodied and varietally pure with cassis, black cherry, blackberry and big, ripe tannins. It was one of those wines that have the juicy goodies to support the seriously high (around 16%) alcohol, which is actually nicely integrated and doesn’t even burn. Cabernet Franc contributes 60%, along with 40% Merlot, to Vesztergombi’s Turul Cuvée 2012, which is another terrific effort to follow the 2011. I’m certainly not alone in comparing the character of this and other Vesztergombi wines to those of Bordeaux. Having said that, the Cabernet Sauvignon 2012 is reminiscent of Chile at its considerable best. Down in Villány, Béla Jekl showed a good example of what Pinot Noir from German Späburgunder clones looks and tastes like, with its deeper color to the Burgundian style and with more pronounced fruit. It also proves that you can make good Pinot so far south. On a more somber note, a number of Pannon Wine Guild members paid their respects to recently departed member László Bussay in a touching film whereby winemakers descended cellar steps to share their memories of the man who put the region of Zala firmly on the winemaking map.
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4 Socialite
Budapest Business Journal | January 16, 2015 – January 29, 2015
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Plans for City Park museum quarter slowly take shape New National Gallery and Ludwig Museum
House of Hungarian Music
Budapest Museum of Photography
Hungarian Museum of Architecture
Museum of Ethnography
An architect involved in the competition created this rendering of how the new museum quarter might look.
Eleven proposals currently under consideration. CHRISTIAN KESZTHELYI
After the first round of a tender to design a museum quarter in Budapest’s City Park (Városliget), some 11 architects’ firms are in the running to oversee the development, which is supposed to reshape the park, according to the management of the state− funded Liget Budapest Project. ADVERTISEMENT
Under the government’s plan, the Liget Budapest Project will involve the development of five new museum buildings: new quarters to hold both the National Gallery and the Ludwig Museum of modern art; new quarters to hold the Ethnographic Museum, which is currently on Kossuth tér; a new Museum of Hungarian Music; a new Museum of Photography in Budapest; and a new Hungarian Museum of Architecture. The total cost of the project is to be HUF 75 billion and is expected to be finished by 2018.
Much of the space to be used for construction is the paved area around 56−osok tere, the strip along Dózsa György út that is south of Hősök tere, so that the park should not lose any greenery. In fact, plans call for increasing the total green area in the park from the current 60% to 65%. The 11 tenderers, which include eight foreign firms and three from Hungary, participated in a site visit in January preceding the start of their work on the blueprints and design. The winner
is to be announced in April, and will be awarded €345,000 for planning a modern building that will host the New National Gallery and Ludwig Museum, project organizers said. According to Liget Budapest project, the judging panel includes 11 Hungarian and international professionals, who will evaluate the entries according to strict criteria: technology, functionality, sustainability, environmental friendliness and expected costs.
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