Inspiring Hungary | 1 October 2019

WHY HUNGARY?

György Matolcsy | Governor

RESULTS ACHIEVED

SINCE 2010

3 |

THE 12 TURNAROUNDS THAT PUT HUNGARY ON A NEW PATH

T U R N A R O U N D 2010 2018

1 Labour market Employment 3.7 million 4.5 million

2 Tax system Focus on sales taxes

3 Motivation Marginal tax wedge 64.1% 45.0%

4 Public finance Budget deficit -4.5% -2.2 %

5 Public debt Gross public debt 80.2% 70.8%

6 EDP End of EDP procedure

7 Monetary policy Base rate 6.0% 0.9%

8 Lending Annual change in corporate loans -2.5% 12.0%

9 FX loans of households Share of households’ FX loans 65% 0%

10 MNB balance sheet MNB balance sheet in proportion of GDP 40.7% 27.8%

11 Growth GDP growth 0.7% 4.9%

12 Convergence Growth rate above the EU average

Source | MNB

4 |

THE DIRECT ECONOMIC EFFECT OF THE MNB AND EU FUNDS IS NEARLY THE SAME

Source | MNB, European Commission

HUF 10,200 billion ~MNB

HUF 10,200 billion

EU funds

5 |

THE FUNDS AVAILABLE IN THE CURRENT EU BUDGET CYCLE IS AROUND HUF BILLION

Source | Economic Commission

European Structuraland Investment Funds

(non-refundable)

HUF billion

European AgriculturalGuarantee Fund

HUF billion

HUF

Billion

7,300 2,900

10,200

10,200

6 |

Interest saving of the budget

HUF 2,400 billion

Interest saving of the private sector

HUF 2,900 billion

Conversion of FX loansHUF 2,100 billion

Funding for Growth Scheme

HUF 2,800 billion

HUF 10,200 billion

2,400 2,900

2,1002,800

10,200

Source | MNB

THE DIRECT IMPACT OF MNB PROGRAMS UNTIL 2018IS HUF 10,200 BILLION10,200

7 |

THE REGION HAS BEEN CATCHING UP TO THE ADVANCED ECONOMIES

Source | WDI

EVOLUTION OF GDP PER CAPITA (PPP, CONSTANT PRICES)

90

95

100

105

110

115

120

125

130

90

95

100

105

110

115

120

125

130

2010 2011 2012 2013 2014 2015 2016 2017 2018

2010=1002010=100

Hungary Austria France Germany V3 Scandinavian countries ClubMed

Successful crisis management

2013: the growth turnaround begins

8 |

0

10

20

30

40

50

60

0

10

20

30

40

50

60Sw

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Den

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Gre

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ited

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a

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nia

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blic

Hu

nga

ry

Bu

lgar

ia

Ro

man

ia

percentpercent

EU average

THE TOP STATUTORY PERSONAL INCOME TAX RATE IN HUNGARY IS ONE OF THE LOWEST IN THE EU

Source | European Commission

TOP STATUTORY PERSONAL INCOME TAX RATES IN THE EU, 2019

9 |

THE EMPLOYMENT RATE INCREASED THE THIRD MOST SIGNIFICANTLY IN HUNGARY SINCE 2010

Source | Eurostat

EMPLOYMENT RATES IN 2018 (15-64 AGE GROUP)

0

10

20

30

40

50

60

70

80

90

0

10

20

30

40

50

60

70

80

90Sw

eden

Net

her

lan

ds

Ger

man

y

Den

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k

Cze

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ited

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Bel

giu

m

Spai

n

Cro

atia

Ital

y

Gre

ece

Hu

nga

ry 2

01

0

percentpercent+ 14,3 percentage points

EU average

10 |

CORPORATE INCOME TAX RATE IN HUNGARY IS THE LOWEST IN THE EU

0

5

10

15

20

25

30

35

40

0

5

10

15

20

25

30

35

40M

alta

Fran

ce

Po

rtu

gal

Bel

giu

m

Gre

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Au

stri

a

Net

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n

Ital

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Den

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k

Swed

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Un

ited

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m

Hu

nga

ry 2

01

0

Luxe

mb

ou

rg

Cro

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Ro

man

ia

Ger

man

y

Lith

uan

ia

Cyp

rus

Irel

and

Bu

lgar

ia

Hu

nga

ry

percentpercent

EU average

Source | OECD, European Commission

CORPORATE INCOME TAX RATES IN THE EU (FLAT OR TOP MARGINAL), 2019

11 |

IN THE EU, ALONE HUNGARY HAS A CONTINUOUSLY DECLINING PUBLIC DEBT SINCE 2011

Source | Eurostat

CHANGE IN GROSS PUBLIC DEBT AS A PROPORTION OF GDP BETWEEN 2010 AND 2018

-30

-20

-10

0

10

20

30

40

50

-30

-20

-10

0

10

20

30

40

50M

alta

Irel

and

Ger

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Latv

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Hu

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ited

Kin

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d

Fran

ce

Ital

y

Cro

atia

Po

rtu

gal

Slo

ven

ia

Gre

ece

Spai

n

Cyp

rus

percentage pointpercentage point

EU average

12 |

DECLINING EXTERNAL DEBT CONTRIBUTED TO THE IMPROVEMENT OF HUNGARY'S RISK ASSESSMENT

Note | Excluding intercompany loans. * Excluding Ireland, Malta, LuxembourgSource | Eurostat

EVOLUTION OF NET EXTERNAL DEBT AS A PROPORTION OF GDP

-10

0

10

20

30

40

50

60

-10

0

10

20

30

40

50

602

00

4

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

percentage of GDPpercentage of GDP

Hungary V3 average EU average*

13 | Source | Eurostat, MNB

EVOLUTION OF CUMULATED INTEREST SAVINGS BETWEEN 2013 AND 2018

THE DECREASE IN INTEREST EXPENDITURES IS OUTSTANDING IN INTERNATIONAL COMPARISON

-6

-4

-2

0

2

4

6

8

10

12

-6

-4

-2

0

2

4

6

8

10

12G

reec

e

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and

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Spai

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ia

percentage of GDPpercentage of GDP

WHY IS HUNGARY

ATTRACTIVE?

15 |

HUNGARY IS ONE OF THE MOST COMPLEX ECONOMY IN THE WORLD OUT OF 133 COUNTRIES

Source | Harvard University

22

19

10

4

12

14

35

41

RANKING OF THE ECONOMIC COMPLEXITY INDEX (2017)

16 |

HUNGARY IS A POPULAR COUNTRY TO INVEST IN THE REGION

Source | MNB, Unctad

FDI STOCK IN THE COUNTRIES OF THE REGION, 2018

0

10

20

30

40

50

60

70

80

90

0

10

20

30

40

50

60

70

80

90Es

ton

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Bu

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Cze

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percentage of GDPpercentage of GDP

17 |

HUNGARIAN INVESTMENT RATE IS OUTSTANDING IN THE EU

EVOLUTION OF INVESTMENT RATENote | * ForecastSource | AMECO

17

19

21

23

25

27

29

17

19

21

23

25

27

292

00

0

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

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20

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11

20

12

20

13

20

14

20

15

20

16

20

17

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18

20

19

*

percentage of GDPpercentage of GDP

Hungary V3 average EU average

18 |

40

42

44

46

48

50

52

54

56

58

60

40

42

44

46

48

50

52

54

56

58

60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Hungary EU average V3 average

percent percent

TAX RATE PAID BY AN AVERAGE HUNGARIAN SME HAS SIGNIFICANTLY DECLINED AND REACHED THE LEVEL OF THE EU AVERAGE

Source | PwC – World Bank

TOTAL TAX RATE OF A MODELLED MEDIUM SIZED COMPANY

19 |

THE SHARE OF EXPORTS OF SERVICES CONTINUOUSLY INCREASED IN HUNGARY, THEREFORE IT IS ABOVE THE V3 AVERAGE

Source | Eurostat

SHARE OF EXPORTS OF SERVICES IN TOTAL EXPORTS

12

14

16

18

20

22

24

26

28

30

12

14

16

18

20

22

24

26

28

302

00

0

20

01

20

02

20

03

20

04

20

05

20

06

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07

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08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

percentpercent

Hungary V3 average EU average

20 |

HUNGARY SPENDS MORE ON R&D THAN THE V3 AVERAGE

Source | Eurostat

R&D EXPENDITURES AS A PERCENT OF THE GDP (2017)

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0Sw

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percent percent

21 |

THE HUNGARIAN DIGITAL ECONOMY IS THE FOURTH BIGGEST IN THE EUROPEAN UNION

Source | Eurostat

THE SHARE OF THE ICT SECTOR IN THE GDP (2017)

0

2

4

6

8

10

12

0

2

4

6

8

10

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d

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ited

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percent percent

22 |

HUNGARY HAS AN ADVANTAGE IN THE 4G COVERAGE IN THE EU

Source | European Commission

100 percent

99.2 percent

98.9 percent

97.3 percent

95.8 percent

97.5 percent

97.6 percent

99.5 percent

4G BROADBAND COVERAGE AS A PERCENT OF HOUSEHOLDS IN SOME EU MEMBERS (2018)

23 |

THREE DIFFERENT TRANSEUROPEAN NETWORK CORRIDORS ARE CROSSING HUNGARY

Hungary is the first concerning

the length (1936 km) and

density of motorways in the

Visegrád region.

Source | European Commission, Eurostat, Hungarian Investment Promotion Agency

THE CORE NETWORK CORRIDORS OF THE TRANSEUROPEAN NETWORK (TEN -T)

24 |

VIA CARPATHIA: NORTH-SOUTH CORRIDOR

A 3300 km long trans-European road network wouldlink the Baltic Sea with theAegean and Black Seas.

It is expected to be completedby 2026.

It complements the New SilkRoad network.

Source | Ministry of Infrastructure and Construction of Poland

25 |

HUNGARY HAS A RICH HISTORICAL HERITAGE

Source | Wikipedia, europeanbestdestinations.com

Budapest is the most popular

European destination in 2019

26 |

ACCORDING TO THE NOMAD LIST, BUDAPEST IS CURRENTLY THE BEST PLACE FOR A DIGITAL NOMAD TO STAY AND WORK

Note | The Nomad List contains currently 1331 citiesSource | nomadlist.com

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THANK YOU FOR YOUR

KIND ATTENTION!