2023 POLICY ROADMAP

The Hungarian economy is expected to have contracted slightly in 2023, with GDP set to fall by just under 1%. Inflation was also falling, but likely to average 17% over the year.1 The economy faced a number of challenges, including energy supply issues, inflation and the war next door in Ukraine. High inflation
had forced businesses to prioritize cost-cutting over growth, while high finance costs were straining supply chains.

Banks had acceded to a government request to cap interest rates on working capital loans to business, a move expected to restore lending and promote growth.

2023 Framework Conditions Review2

If a score of 5.0 (midpoint) is regarded as just sufficient, just four of Hungary’s 13 Entrepreneurial Framework Conditions (EFCs) were scored as sufficient or better, the same number as the year before. Between 2022 and 2023, nine of 13 EFCs saw their scores increase, while two stayed the same and two increased. The largest fall was for Entrepreneurial Finance, with a score going from 5.3 (well sufficient) to 4.4 (less than sufficient). Both finance condition scores fell, as did the assessments for the three conditions most closely associated with government: both government policy conditions, as well as Government Entrepreneurial Programs. The largest increase was for Ease of Entry: Market Dynamics, which increased from 4.5 (less than sufficient) to 5.2 (just more than sufficient). The score for Social and Cultural Norms also improved slightly.

In 2023, the assessed quality of Hungary’s overall entrepreneurial environment had a score of 4.5, ranked exactly in the middle of the 49 economies in the GEM National Expert Survey (NES). A year earlier it had scored 4.7, so some deterioration in overall quality, as reflected in those reduced framework condition scores, has undone the improvement from 2021 to 2022.

National experts were also asked to assess the quality of social support for women entrepreneurs, and their access to resources relative to men. For social support Hungary scored 3.7 and ranked 23rd, and for relative access to resources it scored 4.4, still less than sufficient, and ranked 38th.

As in many economies, the Hungarian entrepreneurial environment would benefit from improvements to what continues to be by far its weakest framework condition: Entrepreneurial Education at School.

2023 Entrepreneurial Activity Review

In the GEM Adult Population Survey (APS), three in 10 Hungarian adults reported that their household income had fallen in 2023, a little higher than a year before but still the second lowest proportion in GEM (behind Iran).

Entrepreneurship had a limited public profile in Hungary, with one in two adults knowing someone who had recently started a business, less than one in three seeing good opportunities to start a business locally, and just two out of five considering that they had the skills and experience to start a business themselves, the second lowest proportion in GEM (behind Israel). Of those seeing good opportunities to start a business, a relatively low one in three would be deterred by fear of failure. Despite this, less than one in 10 of those not already starting or running a business intended to do so within the next three years, the third lowest in Level B and sixth lowest in GEM.

The proportion of adults in Hungary already starting or running a new business was fairly stable at just under one in 10, as it had been the previous two years, but with men much more likely than women to be starting a new business (in the ratio of about three to two). Established Business Ownership was a modest 7.4% of adults, but reversing the decline of the previous year.

The slowdown in the Hungarian economy was reflected in the nine out of 10 new entrepreneurs
who agreed with the motivation to earn a living because jobs are scarce, although closely followed by the eight of 10 agreeing with the motivation to build great wealth or very high income. Two out of five new entrepreneurs expected to use more digital technology in the next six months, while a creditable three in five had customers outside the country. One in six new entrepreneurs expected to employ at least another six people over the next five years, while two in five were solo entrepreneurs (one owner, no current employees).
 

1  European Union: www.europa.eu

2  A brief description of the GEM approach is given in in the footnote on page 107 of the GEM Global Report.