Despite the war still impacting the Hungarian market, there are also opportunities in the green economy and energy, as well as the Hungarian start-up scene, according to Bird & Bird Head of Energy & Utilities and Competition & EU Daniel Aranyi.
"The war in Ukraine continues to have a significant impact on the Hungarian market, affecting politics, business, and daily life," Aranyi says. "Energy security has been a primary focus, and the prolonged state of emergency has a strong influence on the country's economic development."
According to Aranyi, emergency regulations in the form of government decrees can be difficult to follow, which creates a volatile environment that is not particularly helpful for foreign investors. "For example, the solar industry was shaken by a series of legislative changes enacted in close succession which caused uncertainties and delays concerning grid connection for solar projects under development," he notes. "As a result, investors in this sector, whether foreign or domestic, have needed to rethink their business plans. The introduction of windfall profit taxes and subsequent changes to such rules had a similar deterring effect. Nevertheless, in our experience, investors are quick to adapt and accommodate to the new changes."
Additionally, Aranyi says that the changes at the EU level, such as the implementation of the European Green Deal and the REPowerEU Plan, have had a considerable impact on Hungary. "There is a hopeful expectation for strong development and opportunities for companies operating in the energy industry, despite the current challenges in the Hungarian market," Aranyi highlights. "At the same time, the industry’s responses to sanctions at the EU level, such as restrictions on the import and export of crude oil and mineral oil products, are only now taking shape."
"In line with EU policies, there is a greater emphasis on the green transition of oil and gas companies as well as on energy efficiency through, for example, digitalization and the development of new services and products," Aranyi continues. "Solar is currently the strongest subsector, and both Chinese and EU investors are involved in Hungarian solar projects, with government and political support for this sector. There is expected to be a revival of wind energy in Hungary in the near future, with lifting restrictions on wind developments as one of the EU’s prerequisites for Hungary to utilize the RRF funds." According to Aranyi, "the Hungarian Competition Authority is keeping a watchful eye on the green economy and is closely monitoring compliance with greenwashing guidelines." He also adds that "to ease Hungary’s dependence on Russian natural gas, MOL is ramping up exploration projects in Hungary, with promising findings and future developments announced."
Additionally, Aranyi highlights that the Hungarian start-up scene also proves to be resilient. "There are a significant number of new ideas and business opportunities to pursue, especially in the software development and cybersecurity sectors," he notes. "This presents a welcoming environment for foreign investors, mostly from the EU but also the US, channeling in funds to scale up. As a result, for example, SEON Technologies has now become a global player in the cybersecurity industry."
Aranyi also points to recent developments in the automotive industry: "Despite the challenges faced by the automotive industry in general, due to continued government support, developments have not ceased. To highlight a few, battery manufacturing plants are currently under construction, with a new one planned in Debrecen, BMW is continuing the construction of its factory, also in Debrecen, and Audi is expanding its manufacturing facilities in Gyor."
"Overall, the challenges of the energy crisis have not put a hold on Hungary’s economic development, although it might require a flexible approach to be able to adapt, from both the government and the stakeholders of the industry," he concludes.