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The Buzz in Hungary: Interview with Jozsef Kapolyi of the Kapolyi Law Firm

The Buzz in Hungary: Interview with Jozsef Kapolyi of the Kapolyi Law Firm

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The upcoming Hungarian parliamentary election, scheduled on April 3, 2022, is one of the most pressing political issues, as united opposition parties are competing against the ruling party, according to Kapolyi Law Firm Managing Partner Jozsef Kapolyi.

"The opposition parties have formed an alliance and have agreed on a common prime-minister candidate to run against the ruling parties," Kapolyi says. "This year’s election will definitely be different compared to the previous two ones in the past twelve years when the opposition parties were rather fragmented. To say the least, the elections in April will be more competitive compared to the past," he adds.

Kapolyi highlights that the new act on compensation for long-lasting civil litigation procedures has been one of the major legislative developments. "A new act was adopted by the Hungarian parliament and entered into force as of January, establishing financial compensation from the state in case of excessively long civil litigations," he notes. "It will be interesting to see the actual impact of this law on businesses and civil proceedings."

According to Kapolyi, Hungary is facing some challenges with regard to the economy, similarly to the rest of the world. "Inflation and rising prices are very noticeable issues recently. In Hungary, we have one of the highest inflation rates in Europe. In January 2022, the inflation rate is expected to reach 7,4%, which may be reduced by the government's official price cuts on fuels and many basic foods. Accordingly, the National Bank of Hungary is raising the interest rates, which will have a very big impact on investments in Hungary," Kapolyi points out. "It is also worth mentioning that the government has fixed the interest rates on residential mortgage loans at the level of October 2021 and that this measure came into effect in early January 2022."

"Another significant update is related to the National Bank’s NKP funding program (Growth Bond Program), which was launched to support the financing needs of companies," he adds. "The program has been implemented for the past two and a half years, enabling 74 companies to issue corporate bonds through it. This program has provided approximately HUF 2,500 billion for the corporate sector. The program ends in January 2022, having an interesting impact on the finance and corporate sectors in Hungary." According to him, many companies are now trying to receive the final financial support from the National Bank of Hungary, which creates high competition among them.

"In addition, more companies are trying to attract financial resources from capital markets, and launch IPOs," he notes. "AutoWallis' recent transaction is a good example, as it was a first IPO in the past five years which was aimed not only at institutional but retail investors as well." According to him, "the AutoWallis deal was a significant success, with the shares oversubscribed in a very short period of time on a good price, as the interest from investors was quite high."

"Other new companies have also arrived on the stock exchange recently, and a few are in the preparatory stage for the public offering of shares on the Budapest Stock Exchange,” Kapolyi adds. Accordingly, "the capital market has a high interest for new kinds of financing structures, like private investment funds," he concludes.

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