The Power of the CEE’s Business Services Magnet

THE ROLE OF FDI IN THE BSC SECTOR IN HUNGARY

It seems foreign investors just can’t get enough of Hungary when picking a location for their business services centers, as the country attracts such investments one after another. Classic behemoths and family businesses with a global reach have flocked in droves to the market to support their worldwide operation. They are also bringing ever more complex roles to their Hungarian BSCs.

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COVID-hangover and Inflation Provide Challenges to Services Sector

In an economy deeply embedded in the international context, the Hungarian services sector is as strong or weak as any other element: logistics, salaries, and growth. The near future does not show much reason for optimism, but a year from now, things might start recovering.

By Balázs Barabás

Rather than isolated figures, like inflation, GDP growth, or the employment rate, the state of the economy is probably better indicated by economic sentiment. This indicator is published monthly by GKI Gazdaságkutató Zrt. (GKI Economic Research Co.) and, in the case of business sentiment, it is calculated from the responses of enterprises in industry, trade, construction, and services to questions concerning the state of business and expectations of turnover and employment. (From within the services field, companies in the financial and public sectors are not included.)

In September 2022, the business confidence index was slightly increased, although it was noticeably below its July level. Except for construction, all sectors in the business sphere had become more optimistic to a greater or lesser extent, GKI found. In the services sector, the confidence index also improved in September, mainly driven by an improvement in the overall business climate and the perception of expected turnover.

The picture is not all bright, though, as both companies and households saw the future state of the Hungarian economy as increasingly unsettled in recent months. In September, this feeling further strengthened among consumers. In the business sector, except for industry, a significant improvement was seen, although concerns remained very strong.

Reasons to be concerned are plentiful. GKI also published its GDP growth forecast, which is far from good for 2023. While earlier, growth of 2.7% had been forecast, September’s revision predicted a decline of around 3.5%. That change is justified, GKI said when announcing the new data, by fasterthan-expected growth in the second quarter of 2022, a spectacular deterioration in the equilibrium, the increasingly dangerous global political and economic situation, and the austerity measures taken and expected during the year, which will have an impact in 2023.

EU MONEY? In addition, GKI assumes the continuation of the current external environment, with slow but at least partial access to EU transfers. GKI also raised its inflation forecast to 14.5% for 2022 and around 16% for 2023. The general government deficit relative to GDP will be about 5% next year, and the financing needs relative to GDP will be alarmingly high, at 3.5-4%, even if EU transfers start to flow in, the economic research institute says. This will necessarily cause a threatening rise in foreign debt.

GKI’s 2023 forecast seems well supported by figures from 2022. The Hungarian economy indeed returned a spectacular performance in the second quarter, reaching a growth of 6.5% year on year, fueled mainly by services. The whole services sector registered a growth of no less than 10% compared to 2021.

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István Lenk, president of ABSL Hungary and managing director of Eaton Hungary Kft.

Stable Contributor to GDP Growth Reaching Greater Maturity

Last year, the Hungarian Service and Outsourcing Association changed its name to the Association of Business Service Leaders. István Lenk, president of ABSL Hungary and managing director of Eaton Hungary Kft., spoke with the Budapest Business Journal to explain what lies behind the name change, the evolution of the business services sector in the country, and what lies ahead.

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Building a Global Career and Perspectives From Hungary

The Budapest Business Journal spoke with Máté Fazekas, the lead of the BSS Hungary Cooperation at the American Chamber of Commerce in Hungary and head of corporate, public affairs, and brand at BT, about what AmCham and its working group are doing to promote the business services sector in Hungary.

By Robin Marshall

BBJ: How did the BSS Hungary Working Group come into being? How many members does it have, and how regularly does it meet?

Máté Fazekas: Although this sector is one of the biggest success stories of the past decade of the Hungarian economy, it is still hardly known by the public. Throughout the years, the Hungarian centers have expanded with higher level, more complex, and more added value tasks, which means more responsibility, more challenge, and higher salaries. Currently, we have more than 150 companies and over 70,000 employees in the business services sector; these are significant numbers, but we’re still a mystery for job seekers.

The BSS Hungary cooperation aims to resolve this issue, promote the sector, and raise awareness for its opportunities. This is a sector of language skills, but we are no longer one dimensional: call centers and shared services are the past; higher added value business services and centers of excellence are the present and the future.

The idea of joint efforts and resources turned into reality in February 2019 when BSS Hungary started operating under the umbrella of AmCham. We have 28 member companies, regular plenary and high-level meetings, and dedicated project teams to reach our most critical annual goals.

BBJ: What is the greatest challenge for the BSS today? Tight labor markets? Graduate supply? Salary inflation? Sector awareness? How do you hope to overcome this?

MF: All of these are challenges, but one of the advantages of such cooperation is that we can share and discuss individual solutions and find an even better one together. Let’s take our recently introduced meeting series called BSS TalX, where we started with the hottest topic of the summer: the deteriorating HUF/EUR exchange rate. It has different effects on each firm depending on the core business of the parent companies, but it surely melts the value of the wages of the Hungarian employees. We spent an afternoon talking about how member companies handle this situation while also sharing best practices regarding employees’ compensation.

The good news is that, thanks to our extensive educational cooperation, fresh grads are more familiar with our sector, but this is another good argument to make joint efforts. Member companies have established connections with multiple institutes, but together we can cover almost all the universities in Hungary, which is quite a remarkable network, right?

BBJ: How early in the education piece does the working group seek to get involved? Are you working purely with undergraduates, or are you trying to catch the interest and attention of high schoolers or even earlier?

MF: The sector’s focus is traditionally on language-speaking fresh grads who are agile, open-minded, and eager to start even an international career. They’re ready for new challenges, which they usually seem to find abroad, leaving the country. The business services sector can prevent this by offering them a global view and tasks locally, paired with an appealing benefits package.

Of course, not all the BSS jobs require a university degree, so we’re reaching out to vocational schools and high school students as well. Even if they don’t want to continue their studies at the tertiary level, they can find challenging tasks and a defined career path with our member companies.

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BUSINESS SERVICES EXECUTIVE BIOGRAPHIES