Budapest Business Journal 3101

VOL. 31. NUMBER 1 | JANUARY 13 – JANUARY 26, 2023

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HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BUDAPESTBUSINESSJOURNAL.COM

SPECIAL REPORT INSIDE THIS ISSUE

The Year Ahead The Budapest Business Journal Wishlist 2023 As has become a tradition in recent years, the Budapest Business Journal invited a variety of people from across Hungary, some of whose voices would not normally be heard in our pages, to offer us their wishes for 2023.  12

‘Wait and see’ for Most Real Estate Sectors at Start of 2023 Investors will continue to show interest in the Hungarian investment markets with a yield premium for quality, sustainable assets. But the current investor hesitancy reflects the geopolitical uncertainty says real estate editor Gary J. Morrell.  14

Reading the Runes for 2023

SOCIALITE

Discover Symbolist Gyula Tichy at the National Gallery The exhibition of work by Hungarian painter-poet Gyula Tichy at the Hungarian National Gallery (MNG) in Budapest, entitled “The Master of Hungarian Symbolism,” is a revelation, writes David Holzer.  16

NEWS

Hungary Starts New Year in Better Place Economically Hungary’s economic problems are far from over, but New Year trends have boosted sentiment.

Zoltán Török, head of research at Raiffeisen Bank Hungary, runs his eye over the figures for our Macroscope report. 3

SPECIAL REPORT

Mariann Trippon, senior analyst at CIB Bank, believes the domestic economy is likely to be characterized by growth of around zero percent, with moderating inflationary pressures from mid-year onwards. 11

BUSINESS

Delight at EC agreement, but Funding Requires Conditionality

In mid-December, the EC and Hungary adopted an agreement that specifies the institutional changes Hungary needs to make to access European Union funding, including the EUR 5.8 billion allocated to Hungary as its part of the Recovery and Resilience Facility.  8

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Budapest Business Journal | January 13 – January 26, 2023

IMPRESSUM

THE EDITOR SAYS

A POSITIVE START TO 2023. WHAT NEXT?

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Balázs Barabás, Zsófia

Czifra, Kester Eddy, Bence Gaál, Gergely Herpai, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Robert Smyth.

LISTS: BBJ Research (research@bbj.hu)

It used to be fashionable around the end of the year for news organizations to offer a “school report” on the government of the day. Perhaps it was just an excuse for editors who had been bullied by teachers at school to write “must do better” headlines, but it rather seems to have fallen out of fashion.

One reason is that in the past few years, the business of government seems to have become increasingly reactive rather than proactive. It is already a problem that political expediency makes most politicians shorttermist by nature. Plans that could affect real change in any area of life are almost by definition long-term, while party politics deals in four- or five-year election cycles. Add a pandemic to that, or a global economic slowdown, or rampant inflation, or (which, we had convinced ourselves seemed the least likely outcome until February 24, 2022) war and even the best-laid plans and aspirations are likely to be thrown out of the window, along with the baby and the bathwater, in the rush to “get things done now.”

Viktor Orbán is, by many definitions, an unusual politician. Most party leaders would surely give a minor body part to still be in power after 12 years of uninterrupted election success, four consecutive election cycles that will see him keep control of the levers of power at least until 2026 unless something very unexpected happens. (The car crash that was British politics in 2022 might suggest we should all be prepared for “something very unexpected,” but I digress.) But even our Prime Minister is not immune to the demands of political reality, which is why he has been so keen and so vocal to blame Hungary’s

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European-leading inflation on the war in Ukraine.

But as our Macroscope article this issue points out, Hungary was already experiencing growing inflationary pressure before the war.

Given the potentially toxic mix of economic headwinds Hungary faced towards the end of last year, not least what was happening to the forint, I found the outlook of Zoltán Török, head of research at Raiffeisen Bank, who we spoke to for Macroscope, surprisingly upbeat. To be clear, he is not saying Hungary is about to enter a land of economic milk and honey, and his concluding line is “I don’t think it is gonna last,” but recent experience suggests we should take what we can, when we can.

There has been movement on the EU funds (we have a story on that, too), though this is a saga that surely still has some twists and turns to deliver. The forint has recovered somewhat, a fact not unconnected to that agreement signed with the European Commission. The government was able to organize a significant bond issue, three times over-subscribed, according to Minister of Finance Mihály Varga. The budget deficit appears to be back under control. There will probably be less good news about inflation, with the December data due today, but it is nice to start the year with something positive in mind. Wouldn’t it be nice to think we could get back to the days when all we had to worry about was “business as usual?” Happy New Year, folks.

Robin Marshall Editor-in-chief

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THEN & NOW An aircraft belonging to Hungarian low-fare carrier Wizz Air lands at Debrecen International Airport (233 km east of Budapest by road) on January 10, as pilots from the airline performed practice drills. In the black-and-white image from the Fortepan public archive, passengers board a plane in 1957 belonging to the then national flag carrier, the now defunct Malév Hungarian Airlines, at what was then known as Ferihegy Airport, but today is the unused Terminal One of Budapest Ferenc Liszt International Airport.

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News

• macroscope

Hungary’s Economic Problems far From Over, but New Year Trends Boost Sentiment emphasizing that even after this auction, Hungary’s foreign-denominated state debt remains less than 30% of the total.

(The previous targeted level was 25%.)

For Prime Minister Viktor Orbán, 2022 had, as he put it, “probably been the most difficult year in Hungary since the fall of Communism, definitely as far as my memory goes.”

KESTER EDDY

Speaking at a pre-Christmas press conference, Orbán, as is his wont, put much of the blame for Hungary’s woes on the war in Ukraine, omitting to mention that inflation, for example, was on the rise and hitting 8% before the Russian invasion in February last year.

True, the difficulties increased through the year: headline inflation in Hungary hit 22.5% in November, the highest in the European Union. Hungary’s economy, suffering from the effects of the droughthit agricultural sector, grew in the third quarter by 4% year-on-year, but that still meant a small, 0.4% contraction against the previous quarter, according to Central Statistical Office data.

As both businesses and households grappled with sky-high energy prices, industrial production stalled, slipping 0.7% in November on October (which, in turn, was 3.6% down on September), indicating the likelihood of a second consecutive GDP contraction in the fourth quarter of 2022. This would tip Hungary into a technical recession.

The signs of the downturn are visible to all: In the capital, of the

662 shops

on the Pest side of the Grand Boulevard (Nagykörút), 129, or a fraction under 20%, are closed, according to a survey by the website G7.

Even the popular malls are not exempt from the trend, as a walk around Mammut, in prosperous District II, revealed early in January. (Unlike on the Nagykörút, vacant units in malls are somewhat disguised, artfully decorated, and used to advertise other retailers, but vacant they remain.)

On the political level, protests and civil disobedience action by teachers protesting against low wages and working conditions reached new levels in January: any climbdown by the government on the salaries issue would hit the 2023 budget expenditures, and this after the government itself raised the deficit target

Significant Bond Issue

from 3.5% to 3.9% of GDP at the end 2022.

And yet, going into the New Year, there is definite cheer for the economy.

Dramatic Tightening

Most impressively, after massive preelection spending early last year appeared to be propelling the budget deficit well beyond even the revised 6.1% target, a dramatic fiscal tightening reversed the trend.

This means, as OTP Research analyst Gergely Rezessy and chief economist Gergely Tardos put it in an early January note, “the 6.1% deficit target for 2022 is easily within reach, even with a sizeable deficit in Q4.”

“I assume that EU funds will not come seamlessly, there will again be some disputes, political issues, rule of law, gender issues […] so, I think this whole problem over EU funds has not been resolved. And at the same time, the government needs some funding, so it’s important that in this period when the market environment was quite benign, they could make this big bond auction.”

(Interestingly, OTP Research also noted in December that the war in Ukraine had, at least up to the third quarter, minimal effect on Hungary’s exports. “This is mainly because the EU economies also showed stronger-than-previouslyexpected resilience against the effects of the war, while the easing of the global supply chain problems helped the revival of vehicle production,” the team reasoned.)

Progress on the budget deficit apart, arguably the most critical influences

Zoltán Török, head of research at Raiffeisen Bank Hungary. on the economic outlook were the twin effects of falling energy prices on world markets and the “partnership agreement” on access to European Union funding signed with the European Commission in late December. (See “Navracsics Delighted by EC agreement, but Funding Dependent on Conditionality” on page eight for more on this.)

This resulted in the forint strengthening by

some

5%

month-on-month, to around HUF 396 to the euro in early January. Against the greenback, the rise was even more pronounced, the forint gaining almost 7% to around HUF 371.

These gains, in turn, will help to limit the burgeoning balance of trade and current account deficits and, critically, also help curb inflation, at least by the spring.

As it stands, analysts have been predicting that the consumer price index will likely rise towards 25% in the new year, partly due to the government scrapping the price caps on auto fuels. (December inflation data is due to be published on the day this issue of the Budapest Business Journal is published, January 13.)

Moreover, the government debt agency exploited the positive mood by initiating a bond auction worth USD 4.25 billion in the first week of January. Minister Finance Mihály Varga said the issue, which was three times over-subscribed, showed investor confidence “is still strong” in the Hungarian economy,

Political rhetoric aside, in view of the risks ahead, the bond issue was significant, according to Zoltán Török, head of research at Raiffeisen Bank Hungary.

“I think it’s important. I assume that EU funds will not come seamlessly; there will again be some disputes, political issues, rule of law, gender issues [….] so, I think this whole problem over EU funds has not been resolved. And at the same time, the government needs some funding, so it’s important that in this period when the market environment was quite benign, they could make this big bond auction. Maybe times will not improve, maybe the other way round, but anyway, it was important to build the safe side and secure this funding,” Török tells the BBJ. In his assessment, the agreement with the EC and the lower world energy prices were equally responsible for the forint’s appreciation since early December.

“At least we haven’t lost the EU funds [….]. That is important. Although it’s not that everything is fine now, after many, many months of no progress, [we now see] at least some progress,” he says.

As for the lower energy prices, this has a significant impact on Hungary, Török argues.

“It’s a big issue as to whether the energy trade balance is going to be EUR 20 bln this year

or

EUR 10 bln.

The market is very optimistic now because, really, Hungary’s main problem – of course, there are many problems – but maybe one of the top-of-the-list items is this very high energy prices and the fast deterioration of the trade and current account balances, and that has become a big concern out of almost nothing last year,” Török notes.

Naturally, in early January, forecasting energy demand is a tough call, but, as the Raiffeisen researcher emphasized, the current mood of the markets is double-acting on Hungary, given the role of exports in the economy.

“The mild winter and low energy prices help the whole European economy, and apart from that, inflation data is coming down in Europe; not in Hungary, but in other parts of Europe, and that’s positive,” Török argues.

But, lest anyone should get too exuberant, he quickly cautions: “I don’t think it’s gonna last long, but at least that’s it for now.”

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Etele Plaza Achieves Breeam ‘Very Good’ Certification The 55,000 sqm Etele Plaza by Futureal has been awarded Breeam “Very Good” certification.

This is part of a trend for thirdparty accreditation organizations to be utilized in projects in both the retail and industrial sectors in both Hungary and the wider Central European region, having first become the norm for developments at the higher end of the office sector.

GARY J. MORRELL

As in the office sector, retail developers and project owners now need to build or renovate shopping centers in accordance with sustainable and green principles due to changing and more

possible. The HVAC systems of the building include UV sterilizing filters.

The systems provide almost 100% efficiency in killing viruses and bacteria in seconds without the use of chemical disinfectants. Disinfection points are available in the busiest areas and the restrooms. The escalators are also fitted with a built-in handrail sanitizer system to maximize safety. The sinks can also be used without touching them,” the company stresses.

The complex includes

around

Breeam accreditated Etele Plaza. sophisticated demands from consumers and tenants and increasingly demanding sustainability regulations.

This is particularly the case with recent shopping center projects such as Etele Plaza, which has just celebrated its first anniversary. Futureal, operating across various market sectors such as office and industrial, has a long-term policy of developing highly sustainable assets in response to tenant demand and the expectations of investors.

“Due to its sustainable solutions, Futureal’s development is the first shopping center in Hungary that has obtained one of the highest green building ratings in the construction phase,” the company said, on what could be seen as the new requirements at the high end of the shopping center market.

“In line with the Breeam certification, special attention was paid to ensuring

easy accessibility, minimizing light pollution as well as the direct environmental impact, incorporating durable materials, and promoting waste reduction and reuse,” the company explains.

“In accordance with the rating, tenants also focused on sustainability during the realization of the stores. Nearly 4,000 sqm of green space, ornamental grasses, shrubs, and trees await visitors at the environment-friendly shopping and entertainment center,” Futureal adds.

Post-COVID Safety

In the post-coronavirus environment, state-of-the-art equipment is also available to ensure the health and safety of visitors, according to the developer.

“In line with Futureal’s Stay Safe initiative, the interior areas are almost completely touch-free wherever

Hungary Continues to Call for Peace, Worries About Blocs Prime Minister Viktor Orbán said that Russia’s invasion of Ukraine has merely capped a series of events that led to a crisis in the Western-centric order during a speech at the Christmas dinner of the Széll Kálmán Foundation outlining Hungary’s strategy for the next decade.

NICHOLAS PONGRATZ

As a consequence of the West’s diminishing influence, due to the rise of prospective rival national models like China, Orbán said that Cold War-era blocs were reemerging.

“In such a setup, all economic, political and cultural transfers take place through the bloc’s leading states,” Orbán said.

Considering Hungary’s “particularly bad experience with blocs,” the prime minister concluded that Hungary’s primary task for the next decade must be to advance from being a medium-developed country to emerge as a regional middle power within Central Europe.

U.S. Ambassador to Hungary David Pressman also made a contrasting reference to the Cold War in his remarks at the

45th

anniversary

of the return of the Hungarian Holy Crown on January 6. The crown had been held by the United States following the end of World War II but was returned during the presidency of Jimmy Carter while Hungary was still under Communism in 1978.

180

retail, entertainment and service outlets, including restaurants, a green roof terrace, cafes, a multiplex cinema, a gym and 1,300 parking spaces. All this is located at a transport hub where the Kelenföld railway station, the Metro 4 line, and the approach sections of the M1-M7 motorways meet.

Chapman Taylor designed the retail concept, the architect was the Hungarian firm Paulinyi & Partners, and Dyer undertook the interior design. The latest generation plaza forms part of a mixed-use development on a brownfield site with easy access from residential areas with 230,000 people within close proximity, according to Futureal.

“Environmentally conscious and people-centered operations had a major role in the development of the new generation Etele Plaza. The building’s state-of-the-art technical solutions have brought a new era of shopping centers to Hungary,” concludes Dóra BorsosVámosi, co-director of Etele Plaza.

Ukraine

Crisis Roundup

During his speech, Pressman called Russian President Vladimir Putin “a holdover from a time that most of the world has tried to move beyond […] who can only lead through fear and intimidation.” While Putin believed the Ukrainians would again submit to that leadership style, Pressman declared that “the Ukrainians, much like the Hungarians decades earlier, had already made their decision.”

Peace is the Path

Meanwhile, Minister of Foreign Affairs and Trade Péter Szijjártó has repeatedly emphasized that achieving peace in the conflict in Ukraine is in the interest of both Hungary and other partner nations.

He recently announced that Hungary would finance the shipment of 10,000 tonnes of grain from Ukraine worth some USD 3.5 million to the Democratic Republic of Congo as part of efforts to solve the global food crisis.

Upon receiving his Congolese counterpart Christophe Lutundula Apala Pen’Apala in Budapest, the Hungarian foreign minister stressed that although there is a significant geographical distance between the two countries, global security threats affect both sides.

“Both countries have an interest in peace and an early end to the armed conflicts that are gripping the world, and we urge the necessary dialogue, ceasefires, and peace negotiations to achieve this,” Szijjártó said.

Szijjártó later echoed these statements following his meeting with his Serbian counterpart Ivica Dačić, saying that the prolongation of the armed conflict in Ukraine goes against the interests of both his country and Serbia and has a negative impact on their respective economies.

“We are both interested in bringing peace to Ukraine as soon as possible [.…], as the possible escalation of hostilities creates serious risks for both countries,” Szijjártó said.

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2023 comes with a challenging outlook, and the automotive industry seems likely to remain vulnerable to economic headwinds.

However, for an industry segment that carries significant weight in Hungary, increasing Chinese investment offers some optimism.

CHRISTIAN KESZTHELYI

Persisting supply-chain problems, the lingering energy crisis, and slowing demand are issues that leave the automotive industry vulnerable in the European continent, with Hungary no exception.

As the main engine for the national economy, the automotive industry’s output is a significant factor in the growth of Hungary’s industrial production. However, the growing slice of electric vehicle production and EV battery manufacturing, coupled with a prognosis of increasing investment from China, should more than keep the local sector afloat.

The output of the automotive industry grew in both September and October 2022, according to the latest figures published by Hungary’s Central Statistical Office (KSH). Manufacturing rose 32.1% year-on-year in October, up from September’s 31.6% y.o.y. growth, but below August’s

57.8% figure.

However, KSH figures indicated that a significant semiconductor shortage affected the low base in October.

Demonstrating exactly why the automotive sector’s growth is so crucial, KSH data shows it accounted for 25% of the manufacturing sector’s output in October. In comparison, the next most substantial contributor

Automotive Matters A monthly look at automotive issues in Hungar y and the region Photo by NINA IMAGES / Shutterstock.com

Investment Prospects from China to Lift Automotive Sector in 2023

News | 5

Hungary’s record EUR 6.5 bln foreign direct investment in 2022 came from countries in the East, as opposed to 42% from the West.

Szijjártó added that investments in the electric and hybrid vehicle sector accounted for 30% of the total and battery production

for

43%,

while calling Hungary, once again, the “European champion” in the changeover to electric mobility.

He also said that the country had become a “meeting point” for German automakers and Asian battery makers. Last year, South Korea was the biggest foreign investor in Hungary, while German investments created the most jobs, the foreign minister added.

was computer, electronics and optical equipment, which had an 11% slice of the overall manufacturing pie. In October, this latter segment rose by 20.1% compared to the same month a year earlier. Still, October’s headline industrial output slowed to 5.9% after two consecutive months of doubledigit growth.

With the automotive industry carrying such a weight, its performance is a determining factor in the headline performance of the national economy.

Investment-wise, trends suggest that Hungary’s “Opening to the East” foreign policy is bearing fruit.

Laying Down Roots

Last September, Contemporary Amperex Technology Co Limited (CATL), a China-based automotive manufacturer, signed a contract to buy a sizeable plot of land in Debrecen, Hungary’s second-largest city, where the firm plans to build a more than EUR 7 billion battery plant.

Minister of Foreign Affairs and Trade Péter Szijjártó said at the signing ceremony that the investment in what will be CATL’s second European plant would create

9,000 jobs.

Hungary will join China and Germany as CATL’s third battery manufacturing base in 2025 when the investment is scheduled to start production. Szijjártó said that the plant would complement German premium giant carmakers Audi, BMW and Daimler, which are already present in the country.

“Hungary is profiting enormously from its pragmatic cooperation with the People’s Republic of China based on mutual respect and free from outside influences,” Szijjártó was quoted as saying by state-owned news agency MTI. He added that bilateral

trade between China and Hungary rose 11% to more than USD 12 bln in 2021 and had grown by 7% in the first half of 2022.

Based on this progress, some pundits expect Chinese investment to become a driving force in the automotive industry in 2023. Another sizeable Chinese investment wave may start in Hungary, which will be given a serious boost by the construction of CATL’s battery factory in Debrecen, Wu Wanliang, the owner of Capital Bridge, which supports Chinese investments into Hungary, said in a press release sent to the Budapest Business Journal in response to our questions.

Compared to European trends that peaked in 2016-2017, Chinese working capital inflow to Hungary has increased in the past four years.

Last year, China’s working capital stock was close to USD 3.5 billion in Hungary, ahead of Serbia and Romania (USD 2.7 bln-2.8 bln) and Poland (USD 2 bln), Capital Bridge says. After the European Union, China is Hungary’s second most important trading partner. Last year, turnover increased by 7.1% and exceeded USD 6 bln.

Investing Together

“These investments contribute to the further inflow of Chinese working capital. When choosing a location, Chinese companies prefer locations where other Chinese companies already operate [...]. They look for locations where they can integrate into the business environment, where they have the right level, skill and quantity of labor at their disposal, and where they can cooperate with higher education,” Wu Wanliang said.

At the end of last year, Hungary’s foreign minister confirmed in a Facebook video that around 48% of

“These investments contribute to the further inflow of Chinese working capital. When choosing a location, Chinese companies prefer locations where other Chinese companies already operate [...]. They look for locations where they can integrate into the business environment, where they have the right level, skill, and quantity of labor at their disposal, and where they can cooperate with higher education.”

Hungary has appeared as a strong advocate for tighter economic ties with China. In Mid-December, Szijjártó called for an imminent investment agreement between the European Union and China after video-conferencing with his Chinese counterpart Wang Yi. A recent report by the Financial Times suggests that, based on private conversations with Chinese officials and European diplomats, China may seek tighter ties with the European Union as opposed to Russia.

“My colleague Wang Yi has done an awful lot for the development of Hungarian-Chinese ties, for which I am grateful, as Hungary has profited much from those efforts,” Szijjártó said, adding that Chinese-Hungarian cooperation over the past eight years was a “clear success story.”

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in 2006, majoring in corporate finance. Between 2004 and 2009, he was a senior consultant at Central European Management Intelligence (Cemi), then between 2009 and 2014, he was the director responsible for Slovakia at Eurobus Invest. In 2014, he was appointed CEO of Arriva Slovakia.

Do you know someone on the move? Send information to news@bbj.hu

Zsolt Kákosy

AmCham Committee Chair Elected The American Chamber of Commerce in Hungary has announced that Zsolt Kákosy has been elected chair of AmCham’s Workspace and Facilities Management Committee by its members.

His two-year mandate commenced on January 1, 2023. An economist, Kákosy has 25 years of professional experience in the real estate industry and has been the senior director of Icon Real Estate Management since 2020, heading the property management area.

During his career, he has worked with offices, shopping centers, and industrial and logistics properties. He has been a member of the Royal Institute of Chartered Surveyors (RICS) board in Hungary for seven years.

Since 2020, he has lectured on property management at Corvinus University of Budapest. He has previously been involved in the work of the AmCham Workspace & Facilities Management Committee for several years.

Indotek Group Appoints Int’l Sales Director Indotek Group has appointed András Kovács as international sales director to support the company’s growing presence outside the borders of Hungary.

Kovács is the company’s sales director and continues to oversee sales in Hungary even after his appointment. He is now also responsible for international office (non-retail), warehouse, and logistics real estate sales, as well as leasing activities.

The creation of the new position was necessitated by the dynamic growth of the company’s international real estate portfolio and ambitious expansion plans, Indotek explains.

“Expansion abroad is a priority for Indotek Group, and in the future, we would like to focus even more on our

international presence. This requires a highly structured and efficient sales activity,” says Dániel Jellinek, the company’s founding CEO. “It is, therefore, essential that the implementation of the sales strategy is coordinated and concentrated in one hand. During his almost seven years with our company, considering our domestic sales activities, András has proven his ability to develop and effectively operate a highquality and efficient sales strategy,” Jellinek continues.

“We are looking to leverage this existing knowledge and expertise by extending his role as sales director and implementing it into the operation of our overseas portfolio. I am convinced that, thanks to András’ expertise, Indotek’s international expansion will be achieved at the highest level,” he adds.

Trenkwalder Group Picks Fresh CEO

Zsolt Szilágyi His successor, previously deputy CEO, was selected by the group’s management, together with the owners.

“It is an honor for me to continue on the path started by my predecessor after decades of working together, in recognition of our work. I will now lead the entire group [and will be] responsible for the excellent team behind DDC. I thank the owners, chairman, CEO János Szarkándi, and all my colleagues for their support and commitment in the past and future,” Szilágyi emphasized.

He started his career at DDC in 1999 as a technical coordinator. He later worked as an investment project manager, then as production manager and plant manager at the Vác Cement Plant. In addition to his professional technical qualifications, he holds a degree in operations management from Stanford University.

The supervisory board of the Viennabased Trenkwalder Group AG has appointed Mark Pollok as the group’s CEO, it announced on January 6.

Until now, Pollok was a member of the board of Trenkwalder Group AG, responsible for operations in Germany and Austria, with the development of the group’s digitalization and customer experience business areas under his supervision.

The 39-year-old specialist with an engineering degree has held various management positions at Trenkwalder Group since 2017.

Previously, he worked at the Droege Group from 2011.

Graboplast Names CEO András Kovács Kovács has been with Indotek Group since 2016 and has a total of more than two decades of experience in the real estate industry.

Previously, he spent nine years in various areas of real estate sales at Tesco Hungary and was the regional leasing director of Orco Property Group for four years. Prior to joining Indotek, he managed his own businesses for five years.

The company is currently active in 12 countries outside Hungary: it has commercial, retail, and industrial properties as well as hotels, for example, in Italy, Romania, Spain, Greece, Serbia, Croatia, Poland, and Portugal.

From this month, László Ivan has assumed the role of CEO of the Hungarian-owned Graboplast, according to hrportal.hu.

The specialist has more than 10 years of senior management and significant international experience. He was previously CEO of Arriva Slovakia.

Ivan obtained a master’s degree in economics from Corvinus University

New CEO at the Helm of DDC From January After the retirement of outgoing CEO János Szarkándi, Zsolt Szilágyi has taken over the role and has been leading Duna-Dráva Cement Kft. from January 1, 2023, the company tells the Budapest Business Journal.

After more than four decades with the company, Szarkándi has stepped down.

László Ivan

Mark Pollok In addition to his role as CEO, Pollok also holds the position of chairman of the board of directors managing the Trenkwalder Group.

“My goal is for Trenkwalder to develop into one of the leading players in both HR services and customer experience using digitization and artificial intelligence,” Pollok said. “The expansion and further development of technological capabilities is a defining part of our future strategy. We want to appear to our business partners as a provider of flexible solutions, speed and exceptional quality in all areas of HR activities.”

Trenkwalder International AG is a market leader in Austria and a leading personnel service provider in Central, Eastern and Southern Europe. The group, which employs more than 50,000 people, is present in 15 European countries, including Hungary, with more than 300 branches.

Since 2011, Trenkwalder has been a member of the German Droege International AG group.

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Budapest Business Journal | January 13 – January 26, 2023

News in Brief Factory gate prices in Hungary rose 37% year-on-year in November, driven by dearer energy and commodities, and the weaker forint, the Central Statistical Office (KSH) said yesterday, according to data released on its website. Prices for domestic sales climbed 63.7%, boosted by energy prices, while export prices rose 23.4%.

The headline Producer Price Index fell from 41.7% in October. In a monthon-month comparison, factory gate prices edged down 0.8% as prices for domestic sales rose 1.6%, but export prices fell 2%. Domestic energy prices, which account for one-third of the PPI, jumped 131.3% year-on-year, lifted by the drastic increase in prices on global markets as well as restrictions on consumption introduced in August for regulated household energy prices.

Domestic prices of the manufacturing sector, which have a 62% weight in the PPI, increased 35.6%. Export prices of manufacturing, which have a 96% weight in the PPI, rose 21.6%, while energy sector export prices, with only a 3.8% weight, increased 59%.

In January-November, factory gate prices climbed 33.6% year-on-year as prices for domestic sales rose 50.7%, and export prices increased 24.8%.

of the year. At the same time, the salaries of many in the public sector were bumped up, putting wage growth in the double digits from January.

EU Gas Storage Levels High Gas storage levels are high across Europe, including in Hungary, thanks to a mild winter, Minister of Energy Csaba Lantos said on January 8, according to origo.hu. Though Europe continues to receive gas from Russia, a protracted war cannot be ruled out, the minister told public broadcaster Kossuth Rádió, adding that a rise in gas prices was also possible.

Commenting on European Commission President Ursula von der Leyen’s remark that the European Union could face a gap of 30 billion cubic meters of gas, Lantos said that around 25 large liquefied natural gas terminals were being built across the bloc, which could give the EU access to LNG. Once those terminals are built, Europe can say that it is genuinely independent from Russian gas, Lantos said. He added that though the LNG terminals were under construction, the winter of 2023-2024 would be a “tough” one

NNK Recommends flu Vaccinations It is recommended that everyone be vaccinated against the flu, the head of the epidemiology department of the National Center for Public Health (NNK), Zsuzsanna Molnár, emphasized on InfoRádio. Molnár stated that in the 52nd week of 2022, 134,000 people consulted a doctor with symptoms of an acute respiratory infection, of which 12,900 were diagnosed with a flu-like illness.

While 15-34-year-olds are most affected, among younger children, those under the age of five are the most at risk, she warned.

Number of Jobseekers Down in December The number of registered jobseekers in Hungary reached 230,345 in December, down by 3,264 from the previous month, according to data released by the National Employment Service (NFSZ), writes portfolio.hu. The number of registered jobseekers was 8,367 lower than in the same month

a year earlier. The data showed 2,904 Hungarians reported as jobseekers for the first time during the month.

The total number of new jobseeker registrations, including repeat registrations, reached 30,121. Around 42% of registered jobseekers received no jobseekers’ allowance or social assistance in December. About 36% had been seeking work for longer than a year. Jobseekers were registered for 485 days on average.

EUR 1.28 bln Trade Deficit in November Hungary had a EUR 1.283 billion trade deficit in November, according to a first reading of data released by the Central Statistical Office (KSH) on January 9. The gap widened from EUR 923 million in October and EUR 745 mln in September. Hungary, an export-driven economy where trade surpluses are usually the norm, has had trade deficits every month for nearly a year and a half. Exports rose 17.8% year-on-year to EUR 13.132 bln, while imports increased 28.8% to EUR 14.415 bln. Trade with other European Union member states accounted for 78% of Hungary’s exports and 63% of its imports during the month. For January-November, Hungary’s exports increased 19.8% year-on-year to EUR 130.925 bln, while imports rose 29.5% to EUR 138.931 bln. The trade deficit reached EUR 8.006 bln.

Photo by T. Schneider / Shutterstock.com

PPI up 37% y.o.y. in November

for the continent. Hungary, however, is in a slightly different position given the relatively high number of gas storage facilities in the country, Lantos said. As long as the Serbian pipeline is functioning, those storage facilities will be filled, he added.

News | 7

Lantos: Additional Paks Blocks Ready by 2032 The construction of two more blocks at Hungary’s Paks nuclear power plant could be completed by 2032, Minister of Energy Affairs Csaba Lantos told Kossuth Rádió. Lantos noted that nuclear power plants “take a long time to build.” The target date for putting the two new blocks online was earlier set at 2030. The four existing blocks at Paks, with a combined capacity of 2,000 MW, account for half of Hungary’s electricity generation.

Lantos also said Hungary’s solar generation would climb over 6,000 MW by 2030. He added that wind energy would be “of a supplementary nature” to that capacity.

Average Wage Growth up Nearly 20% in October The average growth wage in Hungary climbed 18.4% year-on-year to HUF 510,500 in October, according to data released by the Central Statistical Office (KSH) on January 4.

The data for full-timers at businesses with at least five people on payroll shows net wages climbed at the same pace to HUF 339,500. Real wages fell 2.2%, calculated with a Consumer Price Index of 21.1%. The gross median salary increased by 18.3% to HUF 414,000. Hungary’s statutory minimum wage was raised by more than 19% from the start

Moody’s: Hungary’s Creditworthiness Stands out in CEE The sovereign creditworthiness outlook of Central and Eastern European economies for 2023 is “negative,” Moody’s Investors Service announced in its regional sector analysis presented in London, writes business daily Világgazdaság [Global Economy].

However, the international credit rating agency has maintained a “stable” sovereign debt rating outlook for Hungary. Moody’s warns the Hungarian economy may still decline by 0.2% this year.

According to its 10-page study, the reason for the negative

outlook is that the shocks resulting from the economic, budgetary and social effects of the energy crisis will test the resilience (long one of the strengths of the region’s public debt profiles) of Central and Eastern Europe.

2

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Budapest Business Journal | January 13 – January 26, 2023

Business

Navracsics Delighted by EC agreement, but Funding Dependent on Conditionality

Mild Winter

In mid-December, the European Commission and Hungary adopted a “partnership agreement” that includes a “detailed roadmap” that specifies the institutional changes Hungary needs to make to access European Union funding, including the EUR 5.8 billion allocated to Hungary as its part of the Union’s Recovery and Resilience Facility (RRF), designed to help member states recover from the COVID pandemic.

KESTER EDDY

Tibor Navracsics, Hungary’s Minister of Regional Development, was upbeat about the plan, telling the press that “all the goals we set ourselves in June have been achieved,” adding that the agreement meant Hungary could now access its allocation of EU funding.

The financial markets appeared to agree with this interpretation, with the forint strengthening from around HUF 418 to the euro earlier in the month to nearer HUF 407 as news of the agreement was digested.

But Hungary, which has been dragging its feet on EC requirements for the better part of

20

months,

cannot access the funding until it satisfies the Commission that it has fully implemented the road plan.

Minister Navracsics, exuding confidence, has predicted Hungary will satisfy the commission’s conditions by

Labor Productivity in

March 31. These include the need for independence of the judiciary, anticorruption measures, academic freedom, Dóra Győrffy and other rule of law concerns.

But an EC statement on December 22, albeit in very diplomatic language, while for many of the past dozen years, makes it clear that access to up these external injections had provided a to EUR 22 bln in cohesion funds is prime source of economic growth. strictly dependent on Hungary ‘Weak Productivity’ meeting these conditions.

“The past decade has been characterized Without delving into the minutiae by relatively high rates of growth but and Hungary’s compliance or otherwise, weak productivity. In fact, Hungary in the situation begs the question of how 2010 stood at 74.3% of the EU average in important EU funding, past and future, terms of labor productivity, but by 2021, is to the country. For Dóra Győrffy, it was only at 72.7%. This means that professor of economics at Corvinus there was divergence, not convergence, University, it is vital in stabilizing Hungary’s current “precarious” economic in terms of productivity,” she said.

In turn, this implies that extensive situation and, if used correctly, keeping growth is dominant, meaning the the country at least in touch with the economic progress of EU member states. economy can only grow as long as it attracts additional sources of money, Speaking to journalists about a week which EU funds supplied in the past before the signing of the partnership decade, Győrffy reasoned. agreement, she argued that Hungary Moreover, if the net EU transfers as had failed to utilize EU funding properly, a percentage of GDP are compared with economic growth, in seven out of the last 12 years, growth can be seen to have underperformed. the EU-11 (2010-2019) After 2017, this trend reversed, but even in those years which seemed successful, the main reason for the “success” was the overheating of the economy in a process that was unsustainable.

“The government was pursuing procyclical policies, meaning very loose monetary policies, very low interest rates, and the constant devaluation of the forint,” Győrffy argued.

With the onset of the COVID pandemic

in

2020,

Notes: Labor productivity per person employed and hour worked (EU27-100) Eurostat code: TESEM160

A comparison of labor productivity growth in Central and Eastern Europe since 2010. In contrast to most of its peers, particularly the Baltic countries, Bulgaria, and, most notably, Romania, Hungary’s relative productivity had fallen by 1.6 percentage points from 2010 to 2019 to 72.7%, i.e., below that of its eastern neighbor.

“The government spent excessively, not at the start of the COVID crisis, but only in December 2020, giving several percentage points of GDP to preferred companies and sectors. This was topped with pre-election spending in 2021, and this led to a deficit of 7.8% [of GDP] in 2020 and 6.8% in 2021,” she noted.

With a budget deficit expected at 6.1% for 2022 (itself bloated by extra purchases of natural gas imports during the summer, at the highest prices of the year) and with headline inflation at 22.5% in November, the current economic situation “is really precarious,” she said.

the government began to run large deficits, ostensibly, like many other countries, to maintain the economy.

However, in Győrffy’s view, unlike most western economies, this was of greatest benefit to businesses close to government circles.

In terms of good news, the extremely mild winter has seen natural gas prices tumble to pre-Ukraine war levels, and this has added to the market sentiment surrounding the partnership agreement with the European Commission, all helping to lift the forint against the euro to around HUF 395 at the time of this issue of the Budapest Business Journal going to press.

If maintained, this value will reduce the cost of imports (particularly energy) in local currency terms and help restrain inflation in 2023.

However, Prof. Győrffy remains cautious, in essence, because what seemed to be the crunch decision in December by the European Commission on allowing Hungary to access funding has merely been postponed by three months, from December 2022 to March this year.

“There seems to be a belief by the government that the EU does not care in reality about the state of Hungarian democracy and rule of law. The government seems to believe that it’s not important enough because Hungary is small, with

just

0.9%

[of the EU economy], so why mess with such a small country? But with its policies, Hungary is making itself important within the context of the EU decision rules,” she says.

The wording of the December 22 statement appears to back Győrffy’s assessment, indicating that the commission, while open to dialogue, is in no mood for a soft compromise.

After specifying, in some detail, how the cohesion funds must be spent to benefit Hungary, including special attention and finances for better education and integration of disadvantaged groups, explicitly mentioning the Roma, the statement reads: “The rules applicable to cohesion and home affairs funding, i.e., the Common Provisions Regulation, provide that in case of non-fulfillment of the enabling conditions, the commission cannot reimburse the related expenditure submitted other than for technical assistance and for fulfilling the enabling conditions.” (Editor’s note: The bold text is in the original statement.)

“The commission seems to be playing a smart game,” says Győrffy. “The compromise the Hungarian government celebrated ensures that no money is permanently lost. The December 22 decision, however, indicates that no money is coming either, except for agricultural funds, until conditions are met.”

2

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Budapest Business Journal | January 13 – January 26, 2023

Key Economic and Financial Drivers to Watch in 2023 There is an old joke that the role of economic forecasters is to make astrologers look good.

Forecasting GDP or inflation for the upcoming year with any degree of accuracy is virtually impossible, as there are so many chance elements (war, pestilence, famine, etc.). Columnist Les Nemethy believes it is far more important to understand the economic and financial drivers for 2023.

Business | 9

Finance Matters A bi-weekly look at the corporate financial issues affecting the markets

CPI without Energy, Eurozone, % Change from One Year Ago

Source: Eurostat

out of the workforce far faster than decline in the dollar may now further usual), means that wage pressures fuel inflation, particularly if dollar are extremely high, which feeds into devaluation continues in 2023. inflation in services.

High Interest Rates We are rapidly approaching the The European Central Bank has done too point where inflation expectations little too late to raise interest rates over become entrenched, possibly further the past two years, and the chart shows accelerating inflation but almost the result; hence, for the foreseeable certainly making it much more difficult future, European interest rates will, by to stamp out. necessity, play “catch-up” and have While extreme seasonal warmth nowhere to go but up. in most of Europe has helped In America, the Federal Reserve moderate energy prices over the I see a continuation of some of continues to try to wipe out inflation by past few months, a severe cold snap the drivers I have been discussing squeezing the economy, a strategy of could easily swing energy prices in various articles over the past “burning down the house to roast the pig,” in the other direction, further two years, namely: as economist Robert Solow calls it. accelerating overall CPI. (a) Stubbornly high inflation, to which Or, as Luke Groman says, “Volcker Europe is in a particularly hard (b) central banks respond by keeping could do what Volcker did because he place with respect to fighting inflation interest rates elevated or raising them could break inflation before he broke because of exceedingly high debt further, which in turn the Federal Government’s fiscal position. levels on the periphery (Italy, for (c) pushes most of the world into a Powell can’t.” example) and high leverage exposure recession (or worse, depression). Finally, The national debt is several times of its major banks, which hold risky (d) high interest rates and declining higher today (close to 130% of GDP) than government debt as supposedly GDP growth could strain financial it was in Volcker’s time (when it was in “safe” assets. markets. the range of 30%).

In the United States, a significant Let me address each of these in impetus to inflation is the labor Recession, or Worse more detail. An additional twist of market situation. Most people think So, the U.S. Fed will likely continue its war (Ukraine, etc.), climate change that the recent high number of layoffs tight policy until “something breaks” (hurricanes, etc.), and pestilence should dampen inflation. But there (for example, a failure of the bond (COVID, etc.) may contribute to high have also been massive numbers of markets or pension funds). When that volatility. retirements and early retirements; happens, it will revert to Quantitative hence, the number of unfilled Stubbornly High Inflation positions remains high. It is ultimately Easing and even larger fiscal deficits.

Eurostat has just released some The scale may need to be so massive the inability to fill vacant positions, extremely scary inflation numbers. that, given the already high debt levels, not the number of layoffs, that drives Despite energy prices having society’s confidence in fiat currencies wage inflation. moderated in the past months, inflation may be shaken.

The States saw high inflation in 2022 is going out of control in Europe.

Even before “something breaks,” the despite a considerable appreciation Unfavorable demographics, including world economy is already losing steam. in the U.S. Dollar, a strong inflation “the great resignation” (people falling The International Monetary Fund recently moderating influence. The recent

warned that a third of the world might be in recession by 2023. It could be higher.

Strain on Financial Markets

2022 saw a very rare scenario. Both U.S. equity and bond markets declined in the order of magnitude of 20%, an annus horribilis for investors, pension funds, etc. U.S. financial markets still seem hopeful for a soft landing.

Should it become apparent that is not possible, and corporate earnings reports increasingly miss forecasts, equity markets could see a further collapse.

Now that global debt levels are higher, economic fragility is greater. And, of course, COVID and the war in Ukraine, together with many other pressure points in the world, from Taiwan to the Middle East, tend to increase volatility.

Given such drivers, an optimistic scenario would be that equity markets move horizontally in 2023; but whichever direction they take, it is unlikely to be a straight-line progression. Happy 2023!

Les Nemethy is CEO of EuroPhoenix Financial Advisers Ltd. (www.europhoenix.com), a Central European corporate finance firm. He is a former World Banker, author of Business Exit Planning (www. businessexitplanningbook.com), and a previous president of the American Chamber of Commerce in Hungary.

10 | 2

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Budapest Business Journal | January 13 – January 26, 2023

Company Antenna Hungária, Corvinus Purchase Vodafone Hungary, Deal Declared of ‘Nat’l Strategic Importance’ Antenna Hungária and state-owned holding company Corvinus have entered into a final sale and purchase agreement with Vodafone Europe to acquire 100% of Vodafone Hungary, Antenna Hungaria owner 4iG, a listed IT company, said in an announcement posted on the website of the Budapest Stock Exchange on January 9.

After due diligence, the parties determined that the enterprise value of Vodafone Hungary is HUF 660 billion. That is under the HUF 715 bln estimate in non-binding heads of terms 4iG and Corvinus signed with Vodafone Group in August. However, Vodafone noted it is equivalent to 7.1 times Vodafone Hungary’s EBITDA in the business year ended March 31, 2022.

In a press release, 4iG said the deal is expected to close on January 31, following the payment of the purchase price. The acquisition will give 4iG an indirect 51% stake in Vodafone Hungary and the state an indirect 49% stake.

News

OMV Hungaria Completes Gránit Bank Shareholders HUF 1.3 mln Self-service Approve HUF 2 bln Petrol Station BDPST Capital Raise Austrian-owned OMV Hungaria said on January 9 it had completed a close to EUR 1.3 million self-service petrol station for lorries and buses on the M1 motorway, near the border with Austria, according to state news agency MTI. The EuroTruck petrol station, accessible from both sides of the highway, is supplied by OMV’s refinery in nearby Schwechat. OMV Hungaria operates 200 petrol stations in Hungary and has a close to 15% market share. According to public records, the company had net sales revenue of almost HUF 562 bln in 2021.

On January 10, the government declared the deal of “national strategic importance,” thus exempting it from the scrutiny of the competition authority, in a decree published in the latest issue of the official Magyar Közlöny [Hungarian Gazette].

The measure was taken “in the interest of the security of provision of telecommunications in Hungary,” according to the decree. Antenna Hungária has taken out a loan from the Hungarian Development Bank (MFB) and Spar Reaches Wage other lenders to finance the acquisition.

Agreement Meanwhile, the Germany-based Spar Hungary Kereskedelmi Kft. and the Scope Ratings has upgraded 4iG’s Trade Union of Commercial Employees issuer rating by one grade to “BB-“ (KASZ) have successfully concluded a (with a “stable” outlook) from “B+” (with 2023 wage agreement. From January a “positive” outlook), according to an 1, the lowest basic salary for employees announcement on the website of the performing commercial activities in Budapest Stock Exchange. the network after the trial period is At the same time, the credit rating HUF 330,000 gross. The lowest gross agency improved the debt rating of basic salary in economically privileged 4iG’s already-issued bonds by the areas is HUF 350,000. According to the same amount. Scope said the upgrade agreement, the 13th-month allowance, reflects the improved competitive position, business profile, effectiveness, the Spar Loyalty program, and the employees’ 15% shopping discount will and improved credit indicators with also be maintained. The company will the acquisition of Vodafone Hungary, implement wage improvements this year which has a significant share of the exclusively using its own funds.

Hungarian mobile market.

Suzuki leads Auto Market for 7th Straight Year Japanese car maker Suzuki led Hungary’s new car market for the seventh year in a row in 2022, Magyar Suzuki said on January 2, according to autopro.hu. Figures compiled by Datahouse show

13,859 new Suzukis were registered in Hungary last year, giving the company a 12.43% market share.

Those sales included 5,509 Vitara models and 7,187 S-Cross hybrid vehicles; both are produced at the

automaker’s plant in Esztergom (45 km northeast of Budapest).

In addition to the cars it made in-country, Suzuki imported and sold 668 Swift, 267 Ignis, 214 Swace, and 14 Across models in Hungary.

Shareholders of Gránit Bank approved a HUF 2 billion capital raise in the lender by Tiberis Digital, a unit of Hungarian-owned BDPST, according to portfolio.hu. Gránit Bank said Tiberis Digital’s stake would rise from 43.2% to 44.8% as a result.

BDPST acquired a 57% stake in Gránit Bank a year ago. The bank said a Q1-Q3 after-tax profit of HUF 8 bln was placed into profit reserves. Éva Hegedüs, Gránit Bank’s chairmanCEO and minority owner, told shareholders that the lender’s pretax profit is expected to climb to more than HUF 12 bln, while its balance sheet comes close to HUF 1 trillion.

She added that the growth of both deposit and lending stock beat the average for the sector. István Tiborcz, the son-in-law of Prime Minister Viktor Orbán, owns BDPST Group.

Finland’s Valmet Wins Coal-to-biomass Conversion Job Finnish process technologies provider Valmet Corp said on January 9 it had won a EUR 25 million order in Hungary from CHP-Invest Kft., the local unit of French utility group Veolia, for a coal-to-biomass conversion project. The contract calls for Valmet to deliver the main equipment and handle the complete scope of the project to convert two coal-fired boilers to so-called “bubbling fluidized bed combustion.” Following completion in the first and second quarters of 2024, the boilers will be able to run mainly on biomass fuel. “After the recommissioning, the Oroszlány power plant [76 km west of Budapest] will produce more than 600 GWh of renewable electricity, making up about 1.5% of today’s electricity consumption in Hungary,” commented György Palkó, CEO of Veolia Energia Magyarország Zrt.

Masterplast Q4 Loss Puts Full-year Profit at EUR 15.5 mln

An S-Cross about to roll off the Magyar Suzuki assembly line at Esztergom. Photo courtesy of Suzuki.

Listed building materials company Masterplast said it had a loss in the fourth quarter and put full-year net profit at EUR 15.5 million, under its guidance for EUR 18.1 mln issued in September, in an announcement posted on the website of the Budapest Stock Exchange. Masterplast said Q4 was unfavorable due to high feedstock prices, declining sales volume, and foreign exchange rate changes.

It added that high production costs and the tighter market caused margins to narrow, resulting in the Q4 loss.

The firm noted that the negative market trends mainly affected new home construction products, while insulation sales “remained appropriate.” Masterplast estimated it finished 2022 with sales of EUR 202 mln, under its EUR 225 mln forecast.

3

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Budapest Business Journal | January 13 – January 26, 2023

Special Report The Year Ahead

Hungarian Economy may Stagnate, With Double-digit Inflation for Most of 2023

The Hungarian economy is expected to stagnate or grow slightly in 2023, with strong but gradually easing inflationary pressures and slightly rising unemployment, according to an analysis

by CIB Bank.

2020 Q1=100

Hungary: Severe Downside Scenario GDP (LHS)

%y/y

Inflation (RHS)

of

Source: Oxford Economics 2022

BENCE GAÁL

“The domestic economy is likely to be characterized by growth of around zero percent in 2023, moderating inflationary pressures from mid-year onwards, a slightly deteriorating labor market situation, and a slowly and gradually improving external imbalance,” Mariann Trippon, senior analyst at CIB Bank, said at a press event at the end of 2022.

The baseline scenario for 2023 assumed that the government and the European Union would reach an agreement on rule of law issues “and that EU funds will be available again from next year.”

The domestic economy was still growing at a dynamic pace in the first half of 2022, but Q3 saw a significant slowdown.

Although data from the Central Statistical Office (KSH) showed GDP expanding at a rate of more than 4% year-on-year, it was

down

0.4%

on a quarterly basis. The slowdown will become more pronounced in the coming quarters. Nevertheless, GDP growth is expected to have remained around 4.5% for 2022 as a whole, Trippon said.

However, CIB Bank’s forecast for 2023 has deteriorated since May, with the baseline scenario suggesting stagnation or possibly minimal growth next year. In previous years, the main driver of expansion has been domestic consumption, but this is now slowing.

The combined effect of weaker external demand and expected high energy prices is that net exports cannot compensate for the slowdown in domestic consumption.

“Household consumption is forecast to fall in 2023. Although we expect only a moderate deterioration in the

anchoring of inflation expectations, risks related to supply-side tensions, and the uncertain exchange rate outlook could make disinflation challenging.

According to CIB, the National Bank of Hungary (MNB) may start cautiously cutting interest rates early in 2023. If the expected disinflation materializes, country vulnerabilities ease, and risks diminish, the possibility of gradually closing the gap between the overnight deposit rate and the base rate and even a reduction in the base rate in the latter part of the year could open up. In the baseline scenario, by the end of 2023, the base rate of the MNB could fall from the current level of 13% to close to or slightly below 10%.

The MNB’s aggressive 500-basis point interest rate hike stabilized the forint rate in October-November, with the euro-forint exchange rate correcting from a historical high

labor market, rising unemployment, more uncertain employment prospects, falling real income due to high inflation, a higher interest rate environment, and generally deteriorating consumer confidence will dampen household consumption,” she explained.

Low Growth

CIB experts expect meager growth in investment, close to 0%. Fiscal adjustment pressures and the slippage of EU funds will lead to a clear slowdown in fiscal investment next year. At the same time, corporate sector investment will be held back by a weakening demand environment, cost-side shocks, rising financing costs, and an uncertain outlook.

The unemployment rate, which has been slowly rising in recent months, stood at 3.8% in November. Negative trends could continue in the coming months as companies adjust their workforce to the deteriorating demand environment and cost shocks. In line with the economic slowdown, the unemployment rate could reach 4% and is expected to rise further in the first part of 2023. Thereafter, a correction in employment could start in the second half of the year, in line with the expected recovery.

Thus, the acute labor shortages that have characterized the economy for several years will remain. In theory, easing labor market tensions could also ease wage pressures. In the first part

of

2022,

the significant acceleration in wage outflows was due to the increase in the minimum wage and the guaranteed

minimum wage for higher-skilled workers, scheduled wage increases in the public sector, and one-off payments.

But the new data may reflect the corporate response to runaway inflation: in a labor-scarce environment, employers are forced to make mid-year wage adjustments or pay one-off benefits.

“With inflation set to remain at very high levels next year, even in a deteriorating labor market, we do not rule out wage dynamics remaining in the double-digit range. But real earnings will still fall on average in 2023,” Trippon warned.

The domestic economy was characterized by intense inflationary pressures in 2022, which became more widespread and robust as the year progressed. In addition to supplyside factors, strong demand also drove up the rate of monetary depreciation, and price caps have not prevented the acceleration. As a result, CIB Bank forecasts that the annual CPI could exceed 23% in December.

High Inflation Remains

Inflation is expected to remain above 20% throughout the first half of 2023.

Although a sharper deceleration could start from the third quarter, average annual inflation could be around 17%, with the rate of money depreciation only returning to single digits at the end of 2023.

The disinflationary impact of a substantial slowdown in growth and falling demand will slowly and gradually feed through to consumer prices, but the very high starting level, the inadequate

430.

However, the Hungarian currency massively underperformed its regional peers in 2022: the Czech koruna actually strengthened by around 2%, and the Polish zloty lost only 2%.

Mariann Trippon The extraordinary widening of the interest rate differential was, therefore, insufficient to trigger a significant appreciation of the domestic currency. For the interest rate differential to have a beneficial effect, a substantial reduction in the vulnerabilities of the domestic economy and markets is essential, Trippon said.

“If uncertainties surrounding the rule of law process are removed, inflation prospects improve, and a tangible positive turnaround in the country’s balance sheet position is outlined, the forint could strengthen against the euro, and the cross rate could stabilize below 400 again in the course of 2023,” CIB analysts concluded.

12 | 3

Special Report

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Budapest Business Journal | January 13 – January 26, 2023

The 2023 Budapest Business Journal Wishlist As has become a tradition in recent years, the Budapest Business Journal invited a variety of people from across Hungary, some of whose voices would not normally be heard in our pages, to offer us their wishes for 2023.

KESTER EDDY

Teachers are a Precious Resource, and Hungary’s Future Public education in Hungary is in crisis. I live in Szombathely, a town of 70,000 people in prosperous western Hungary, yet in my school, we don’t have an IT teacher, and the only math teacher has decided to quit next year, as she told me, because of the poor working conditions.

Across Hungary, teachers are overloaded, very underpaid, and disrespected by the government and the population. The education system is unsustainable as is; if we don’t have a math teacher next year, which is highly likely, we won’t be able to do the final matriculation tests.

The situation is similar, and often worse, all over Hungary. This is why students, teachers, and parents have been demonstrating against government inaction for months. Yet the authorities are ignoring us, and the problems of the Hungarian education system keep growing.

In my view, teenage students should not be organizing demonstrations; we are at school to study. However, in this situation, we have no alternative but to try to make the government see sense because the problems go beyond a serious lack of teachers.

As a result, together with the teachers, we have drawn up a list of nine demands for the government.

These include, for example, that the public media present our grievances in a fair and accurate way. Our protests, often involving thousands of people, are typically ignored by the state-owned media.

We have asked editors several times to publish our demands, but we only

achieved this when, after six months of campaigning, we organized a protest in front of the headquarters of state television.

knowledge. Because of this, teachers have to create worksheets for us, and this is from their own money.

In addition, many state schools, as opposed to those run by churches, are seriously underfunded. At my school, there is not enough money to buy smart boards. More fundamentally, there is not enough money to even keep the buildings safe. This year, the ceilings in six different schools across the country collapsed.

Thus, in 2023, my wish is that the government starts to listen to and deal with the requests of the Hungarian people, students, and teachers and to solve the problems of the Hungarian education system for the sake of future generations.

As if this were not enough, drought and restrictions on grain exports from Ukraine also added to the inflationary pressures.

Traditional monetary policy responses were really inadequate to cope with the combined effects of these movements, and in any case, the central banks acted a bit late or were slow to respond, which didn’t help.

However, in the second half of 2022, central banks accelerated their interest rate hikes, and most economies began to cool down. The hope was to ease the situation in economies with tight labor markets, to reduce real wages (thereby

Ákos Bozai is a high school student and activist in Adom, the Movement for an Alternative and StudentOriented Education

Tame Inflation and Strive for a Revival of Growth in H2 2023 Ákos Bozai Another example is the free choice of textbooks. Since the “education reforms” of about a decade ago, teachers have been limited to using just one (sometimes two) textbooks per subject. However, the quality of these books is usually very poor, and the so-called “unified curriculum” sometimes feels like a random heap of

Last year was a “disaster” in many respects, even if households were, in many cases, able to ride out the economic storm for most of the year thanks to the money pumped into the economy earlier.

Supply chain disruptions coupled with the return of consumer demand caused price rises. In addition, energy prices, especially natural gas and electricity, sky-rocketed across Europe and further fueled inflation.

József Miró

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increasing competitiveness), and to increase productivity, since productivity improvements usually help to curb inflation and avoid the monster of stagflation. As a result, some economies could experience a deceleration of inflation by the end of 2022.

It is a commonly held view that many European economies will see a decrease in economic output (GDP) in the first half of this year and that in the second half at the latest, inflation will begin to fall significantly, simultaneously with a return to economic growth. I believe Hungary will most probably follow this pattern, although, of course, huge uncertainties remain in such forecasting.

Therefore, my wish for 2023 is to really achieve a significant deceleration of inflation, to have only a small painless quarterly recession in the first half of the year, and to see a genuine return to economic growth in the second half in both Hungary and the world.

József Miró is an equity analyst and strategist with Erste Investment, Hungary.

that are different from their own and work on their feelings, reactions, and unconscious biases.

Since today’s world is increasingly more globalized and interconnected, workplaces should take advantage of the diverse range of skills individuals from different backgrounds can bring.

I wish more leaders would realize that by ensuring a diverse workforce whose members feel they belong, that they are an equal part of something big and are integral to the company’s success, then the leaders themselves will be able to thrive as well.

But recruiting women and underrepresented talent is not the same as retaining them. If companies want to keep them in the workforce, they need to provide, for example, equitable opportunities to advance careers, equitable access to resources and training, and equitable pay.

Open-minded leaders offer a seat at the table, and they mean it.

They know hiring or promoting more underrepresented talent into leadership positions, perhaps to meet quotas or to “perform” for the press, won’t patch equity holes in the employee lifecycle.

Biases around gender, skin color, sexual orientation, age, and disabilities make it hard to see opportunities in employing talents who are different and also in attracting a diverse customer base.

This kind of thinking will result in more employee engagement, better bottom lines, and more satisfied customers.

Gabriella Bódi is a diversity, equity, and inclusion consultant and co-founder of [eureka] Consulting and Games, a Budapest-based organization development company.

American Turns to Hungarian Literature for his Inspirational Wish Gabriella Bódi

Leaders: be More Open-minded.

It’ll Help Everyone and Your Bottom Line This year has been full of unexpected twists and challenges for everyone. I hope that many of you have not only seen the downside but have also experienced the power of joining forces during turbulent times.

I have had the privilege of working with many companies in 2022, and I hope that the positive change I have seen will continue into 2023, with many people realizing that there is strength in our differences and that, if we can harness this strength, we can not only survive a crisis but thrive.

My wish is that leaders and decision-makers will be more openminded in 2023. More open-minded to receive feedback and opinions

For my wish for 2023, let me start with what a Mór Jókai character once said: “What is mine is all gone, what will be mine is far off, and what should be mine is nowhere.” I invoke this as a mental trick to start with low expectations. When light appears at the end of the tunnel, it’s all the more satisfying.

My Hungarian is good enough for many things, but not for a social gathering after a few hours of brainscrambling. Recently, I meant to offer a hug to someone but inadvertently offered to kill her. Opposites in Hungarian can sound surprisingly similar. Never mind (if you’ll allow me to progress from Jókai to Gyula Krúdy) that love is separated from murder by the narrowest of margins; opposites are supposed to meet only in dreams, not in the real world.

And yet Antal Szerb writes in the last line of his most famous novel, “While there is life, there is always the chance that something will happen.” The precise diction of this sentence makes it appear neutral; “something” could be good, or it could be bad. Yet I find this

simple sentence to be incredibly uplifting.

The invocation of life makes it so.

Let’s allow the wishes of old Hungarians to lead us into 2023 with this passage from Krúdy’s Chronicles:

Robert Brooker “Springtime has always promised some wondrous change, for every one of us would like to change our life – an act that winter’s one-note song of somnolent, silent snowfall never inspires. Springtime arrives – and sorrow departs. We go for long walks, or leave town and travel far, far away where we may meet someone, man or woman, whose voice will redeem us, calm and harmonious, so special, renewing our outlook on life, a voice so wonderful to hear. One who tells us what we are here for, how to be happy, where to go, what to think, and how to be good.”

Special Report | 13 We are more than willing to continue our efforts, quietly and privately, to the best of our abilities. But, sitting here in our warm house, three days after Christmas, we’re wondering why the volunteer sector in Hungary is needed to supply Ukrainian refugees who have made it across the border with their basic daily needs?

Hungary has received financial support from the European Union, so why is there a need for a food bank for refugees in Budapest? Why did my friends and I have to buy clothes and warm blankets for refugee families who have been here for almost a year?

When I was still in the USA, I met and worked with a 1956 Hungarian refugee. He had been given language training, health care, and food assistance by the U.S. government as part of his settlement package. Is it too much to ask that refugees in Hungary be given similar treatment that Hungarians received when they were refugees?

My wish is that Hungary supports refugees here better. There should be language training, food assistance, access to basic healthcare, and help with jobs. Right now, it seems that the open-door policy is getting people out of harm’s way. But just keeping them from getting bombed is not enough.

Our experience has been that there is too much reliance in Hungary on the volunteer sector, and the official assistance that exists is too fragmented.

Robert Brooker co-founded the New York Bagel chain in Hungary in 1992 but left in 1995 to study for an MBA. His first book, an English translation (with Zebulon Erdos) of Gyula Krúdy’s “Book of Dreams,” was published in 2020. He has just completed his latest book (co-authored with Ádám Erdész), Albert Kner: a Hungarian Artist in Industrial America, which will be published in 2023.

More, Better State Support for Ukrainian Refugees, Please For the past 10 months, my wife and I have been driving to Ukraine to deliver medical supplies, food, warm clothing, and other basic necessities to refugees, both within their own country and here in Hungary.

We have seen the devastation in Kyiv, Irpin, and Bucha when delivering supplies that friends and family in Hungary and the USA have contributed. We have felt the misery and experienced firsthand the traumas people are going through from attacks earlier in the Russian occupation.

Gene Brown and Marylin Ball-Brown When the war is over, most Ukrainians will go home, just as many 1956 Hungarian refugees have now returned. Will Ukrainians remember only that they were safe? Or will they remember that they were welcomed with all that life requires?

Gene Brown originally hails from California, and Marylin Ball-Brown from Kansas, though they lived their married life in the Pacific Northwest, latterly in Washington State.

After retirement in 2013, they settled in Veresegyház, 25 km northeast of Budapest.

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‘Wait and see’ Characterizes Most Real Estate Sectors at Start of 2023 Investors will continue to show interest in the Hungarian and Central European investment markets with a yield premium for quality, sustainable assets. But the current investor hesitancy reflects the geo-political uncertainty in CEE and the wider European region, says the Budapest Business Journal’s real estate editor Gary J. Morrell.

In this environment, many vendors and investors are adopting a waitand-see strategy in anticipation of a more favorable political, economic and financial environment and more predictable yields and pricing levels.

Industrial is expected to remain the most dynamic sector with strong demand and a significant pipeline across Hungary. Planned office projects are going ahead, although new developments are not being announced, with uncertainty on the demand side. Hotel projects are going ahead despite rising maintenance charges and differing views of the level of tourism and business travel numbers for the year. Retail development reflects the need for repositioning existing shopping centers in a changing consumer environment; the pipeline is limited to smaller regional projects.

Developers and project owners in all sectors are adapting their assets in order to meet ever more sophisticated tenants’ demands and sustainability regulations.

“A wait-and-see approach taken by many investors is, amongst other factors, a result of the increased costs of financing, caused by rising interest rates and related costs such as interest rate swaps, which have increased significantly year-on-year,” comments

Cushman & Wakefield, Eston International, JLL, and Robertson Hungary. The overall vacancy rate for Budapest has increased and now stands at 11%.

Cushman & Wakefield had traced a new office supply of 370,000 sqm of office space under construction in the Budapest office market as of the third quarter

of

2022.

Colliers has traced around 238,000 sqm of space due to be delivered this year.

Office service charges have started to increase significantly, primarily in less energy-efficient office projects.

Staff are expected to spend an average of three days a week in the office, according to research conducted

by Colliers and Skanska. The office market is seen as going through a “hybridization of work styles.”

Well, the accreditation system dedicated to interiors and related elements, is increasingly being utilized in the high-end office sector as developers react to changing working practices, use of space, and increasingly stringent sustainability regulations.

Artist’s rendering of the Dreschler Palace, due to open as a W by Marriott hotel this year.

Kevin Turpin, regional director of capital markets in CEE at Colliers.

“Early signs of price adjustments in some Western European markets, moving out by between

25-50 basis points,

have already been recorded, and we can expect similar pricing shifts to follow in CEE,” he explains.

“Due to the strengthening inflationary pressures, combined with a weak currency, construction costs will likely rise further, meaning that BTS [built-to-suit] and prelease rents will remain subject to upward pressure.”

Domestic Players

Domestic players in Hungary generally dominate the market, and this is not expected to change in the near future, argues Adorján Salamon, managing director of Eston International, on investors active in Hungary.

CBRE puts current prime office yields at 5.25%. A significant yield gap between Hungary and the Czech

Republic and Poland remains. Prime offices in the Central Business District can command lower yields, with highend assets reported to have transacted at a sub-5% yield.

“In terms of yield it is not a general move. Prime assets are not significantly repriced, but on the riskier end of the spectrum, development and value-add opportunities are clearly moving out by more than

100

basis points,”

comments Benjamin Perez-Ellischewitz, principal at Avison Young Hungary.

A sharp slowdown in investment activity is expected, with a large expectation gap between buyers and sellers. In this environment, Perez-Ellischewitz expects annual investment volume to be around EUR 600 million-700 mln in Hungarian commercial real estate for 2023.

“Instead of a dynamic price adjustment, we see a sharp downturn in activity and a longer period of ‘price discovery,’ during which the expectations of sellers and buyers do not match,” he says.

“Consequently, the first half of 2023 will be relatively quiet, and this will continue unless we see some platform/portfolio deals happening in the second half of the year.”

Increased Vacancy

Total supply in the Budapest office market has reached 4.17 million sqm, according to the Budapest Research Forum of CBRE, Colliers International,

“Instead of a dynamic price adjustment, we see a sharp downturn in activity and a longer period of ‘price discovery,’ during which the expectations of sellers and buyers do not match.

Consequently, the first half of 2023 will be relatively quiet, and this will continue unless we see some platform/portfolio deals happening in the second half of the year.”

Leading office developers such as Skanska, Horizon Development, and Futureal are committed to developing their projects in line with Well accreditation in addition to the more established Leed and Breeam systems.

Highest Rating

The first 25,000 sqm phase of Budapest ONE has received Well “Platinum” certification, the highest rating available from the third-party sustainability accreditation organization, according to developer Futureal. Further, the first (12,000 sqm) and second (8,000 sqm) phases of its Advance Tower have achieved Well “Gold” certification.

“Futureal aims to be at the forefront of sustainable development to create healthy, environment-friendly, creative, and productive spaces that attract and retain talents as well as improve ESG performance,” says the firm’s chief architect, Gábor Radványi.

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Special Report | 15

“The Well Building Standard will define the next decade of the real estate industry, and we are committed to building all of our forthcoming office projects in line with a focus on advancing comfort, well-being and health,” he insists.

In a significant office completion due this year, Skanska has achieved Well and Breeam “Platinum” preaccreditation for the first 26,000 sqm phase of the 67,000 sqm H2O complex in the Váci Corridor. The

EUR project 65 mln

will consist of three interconnected buildings designed by the Danish Arrow Architects Studio.

“Financial institutes need to report about their portfolio’s EU taxonomy ratio, and projects which comply with the taxonomy criteria are eligible for financial incentives,” points out Zsombor Barta, president of the Hungary Green Building Council.

“This will definitely have a huge impact on the real estate stakeholders and will also push the entire sector towards a more energy-efficient and sustainable future. In my view, this was a big step in 2022; maybe this is not yet visible, but it will become a very important issue very soon,” he says.

Boom Time

The boom in the industrial and logistics sector continues as demand remains high and vacancy stands at a record low. Analysts see this market in Hungary (as elsewhere in Central Europe) as being in a positive position in the post-coronavirus period, given the background of growth in e-commerce and light industrial production in major regional hubs.

CTPark Budapest West by CTP is part of the continuing industrial and logistics boom.

“Both the significant amount of new supply arriving to the market and the high proportion of prelease transactions in the take-up demonstrate the continued developer and tenant appeal of the market,” says Cushman & Wakefield.

The total industrial supply in Hungary has reached 4.4 million sqm, 1.4 million sqm of which is located in regional hubs, with more development expected outside of the capital. Overall vacancy stands at

around

5%,

“Due to the strengthening inflationary pressures, combined with a weak currency, construction costs will likely rise further, meaning that BTS [builtto-suit] and prelease rents will remain subject to upward pressure,” Cushman & Wakefield comments.

In the retail sector, no large-scale shopping centers are currently planned in Budapest. Instead, most retail development is as part of mixed-use projects, smaller regional retail formats, and the renovation of existing Budapest shopping centers.

Disposable income in Hungary will continue to be weak as inflation has hit 20%, the highest rate over

the last two decades, and the forint is weak. However, online sales fell year-on-year in the final months of 2022 while bricks and mortar retail sales increased, proving that demand for physical retail is prevalent, according to Cushman & Wakefield.

Food and beverage and sports brands retail openings are expected in the coming year.

Hotel Pipeline

A number of hotel projects are at various stages in the preparation and and Colliers has traced about 276,000 sqm construction process in Budapest and of industrial and logistics space scheduled elsewhere in Hungary. However, the to be delivered across the country in 2023. pipeline is difficult to estimate, with schedules slipping in the current uncertain market environment.

“The major bottleneck for developments going forward is the combination of the rising cost of hotel operation (energy, labor, cost of food), project financing (increasing interest rates and reluctant banks), and construction (supply chain issues, inflation, etc.) However, even under such constraints, there are projects going ahead,” says Attila Radvánszki, director of Horwath HTL Hungary, giving a cautiously optimistic perspective on the hotel market.

Horwath HTL has traced 3,500 hotel rooms in Budapest due to be delivered in the next three to five years, out of which 1,500 will be in luxury hotels.

Scheduled openings for 2023 include the Dorothea Autograph Collection

by Marriott in Vörösmarty tér, the W

by Marriott at the Dreschler Palace, the Radisson Collection adjacent to St. Stephen’s Basilica, and the Radisson hotel component of the BudaPart development.

“We believe competition is going to increase greatly, where competitive advantages such as location, physical condition, quality of service, distribution channels, together with the ownership’s financial strength, will play a crucial role The first two phases of the Advance Tower by Futureal have achieved Well “Gold” certification. in the next 12 months,” adds Radvánszki.

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Socialite

Discover Symbolist and Poet Gyula Tichy at the Hungarian National Gallery The exhibition of work by Hungarian painterpoet Gyula Tichy at the Hungarian National Gallery (MNG) in Budapest, entitled “The Master of Hungarian Symbolism,” is a revelation, writes David Holzer.

“I found Tichy’s work to be highly original,” Földi tells me. “In him, I saw something special. He was influenced

by Japanism, Vienna Art Nouveau, and so on, but he had a unique way of seeing that I liked very much,” she explains.

“I started with his linocuts and moved on to his work in other media. I also learned he was a writer. I was intrigued by the fact that Tichy was interested in areas such as mechanics, science, natural science, astrology, and science fiction, and this made his oeuvre more complex than that of other artists,” she argues.

This complexity is reflected in two works entitled “Melancholia,” one a linocut and the other an etching. Both feature an odd combination of classical and modern imagery that, apart from making general observations, I find impossible to decipher. This, along with Tichy’s technical skill, makes the work deeply compelling.

Most Comprehensive

The Tichy exhibition at the MNG consists of around 80 works and is the most comprehensive yet mounted.

Thanks to a private collector offering pieces from his collection, it includes work that has rarely been seen before or is being exhibited for the first time.

“We had a large collection of linocuts at the MNG, but we didn’t have many China ink drawings or etchings,” Földi explains. “We’d known for a long time that this collector had a number of works that had been left by Tichy after his death, and we were really keen to have these in the exhibition.”

The collector donated China ink drawings, etchings, and the so-called Knowing nothing about Hungarian “Prophesy cycle” made by Tichy in 1916, symbolism, I have no idea whether Tichy in the middle of World War I. This, Földi is its master. But there’s something about says, offers an insight into the artist’s his paintings, graphic art, and drawings thinking and depicts how nine prominent that’s unlike anything I’ve ever seen.

Hungarians could use technological Gyula Tichy was born in what was then innovations to help Hungary win the war.” called Rimaszombat (now Rimasvská The response from the general public Sobota in modern-day Slovakia) in 1878 to the exhibition, which was originally and died in 1920. After high school, he intended to be mounted in 2020 (the began training as a mechanical engineer 100th anniversary of Tichy’s death) but but dropped out for health reasons and was delayed by the pandemic, has been transferred to the Model Drawing School uniformly positive. in Budapest.

“It’s been a revelation to the general Melancholy, c. 1912, blue linocut on paper, from the Museum public,” Földi says, “and to my colleagues.”

After he graduated, Tichy taught art at of Fine Arts – Hungarian National Gallery, Budapest. the painting school in Nagybánya (then For me, the Gyula Tichy exhibition is in what was eastern Hungary, but now yet another introduction to a fascinating known as Baia Mare and in Romania) Hungarian artist of whom I’d never Földi specializes in Hungarian art and at high schools in Fasor (Budapest) heard. I asked Földi why she thought so life. Always interested in physics, from the second half of the 19th century and Rozsnyó (now Slovakia). many great Hungarian artists are simply astronomy, and the technological and the first third of the 20th.

He was a member of Kéve, the unknown outside this country. advances of his time, he focused In 2005, she was the curator of an Association of Hungarian Fine and “The artists that are known abroad, on writing a science fiction novel, exhibition of Hungarian woodcut and Applied Artists founded in 1907, which Moholy-Nagy or Victor Vasarely, for “Prisoners of Mars,” which he never linocut art in Miskolc (180 km northeast united styles such as Art Nouveau, example, lived and worked outside finished. He was working on his of Budapest). Researching Hungarian art Hungary, in Europe and the United naturalism, post-impressionism, and memoir when he died at the young at the beginning of the 20th century and States. The work of those Hungarian Fauvism to promote its members’ age of 31. the symbolist and Art Nouveau period, work, and was a regular contributor artists who stayed at home is not An Artist Rediscovered she discovered Tichy’s work. at its exhibitions. represented in the big museum During his lifetime, Tichy was Symbolism was a late 19th-century Like Kéve itself, Tichy’s work was collections in other countries, so they reasonably successful, exhibiting in movement in the arts that sought to heavily influenced by Art Nouveau, don’t have any kind of reputation.”

Vienna and Munich in 1914. Today, he represent absolute truths symbolically particularly that of British graphic artist All the more reason to keep an eye on is being rediscovered by art historians through images and language. Unlike Aubrey Beardsley, who exhibited in what’s on show at excellent Budapest venues and the public. Curious about what naturalism and realism, symbolism Budapest. Tichy illustrated several books such as the Hungarian National Gallery. makes Tichy’s work so unusual, I spoke was more about how what was and published collections of his own to Eszter Földi, curator of the exhibition. depicted or described affected the work. The best known of these is 1909’s viewer or listener. The imagery used “Tales of an Ink Bottle.” He also published She is now an art historian at the “The Painter-Poet. Gyula Tichy, the Moholy-Nagy University of Art and by symbolist painters was often drawings in the Móka magazine.

Master of Hungarian Symbolism” Design in Budapest, but at the time this drawn from dreams and mythology.

From 1914, when he struggled is on at the Hungarian National exhibition was initially conceived, she It was intensely personal and private, with ill health, visual arts gradually Gallery in Budapest until March 5. was a senior curator at MNG. ambiguous and obscure. receded into the background of Tichy’s

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News Culture

in Brief

InterUrban to Bring Whole World to Veszprém Hungary hosting the 2023 European Capital of Culture offers a unique opportunity to promote the BakonyBalaton region as a European creative and cultural center, with Veszprém as its center, according to the organizers.

It also provides a European, if not a world stage for the cultural riches of Veszprém’s fellow Unesco Cities of Music and its sister cities around the globe. Through the InterUrban program, the melodies, flavors and creative talents from 29 cities will be brought to Veszprém and the Bakony-Balaton region. The featured InterUrban city will change every two weeks, with the first to be presented the 2022 European Capital of Culture Kaunas, from Lithuania. Kaunas’ period in the spotlight will run from January 16-29 and overlap with the Grand Opening of the cultural year on January 21-22. Kaunas will present concerts by Daumantas Lukosiunas and CinaMono, a writer’s workshop with Sandra Bernotaite, a photo exhibit by Remis Ščerbauskas, and a film by Aiden Barry.

HUF 1.2 bln-plus Paid out to World Cup Gamblers State-owned lottery company Szerencsejáték said on December 19 that more than HUF 1.2 billion in winnings went to Hungarians who bet on Argentina in the World Cup final on December 18. Szerencsejáték said 1.2 million bets were made on the match against France, which Argentina won on penalties.

Among the red wines, the 2019 GT 50 Cuvée from the Günzer Tamás Winery in Villány (215 km southwest of Budapest) was victorious. Pannonhalma won the award for the first time, while the Villány winery collected its fourth. Tamás Günzer also became the first wine producer to win the prize in consecutive years.

Budapest Jazz Club Celebrates 15th Anniversary The LFZE Big Band, the Hodek Áron Trio, and the Oláh Kálmán Jr. Quartet took to the stage on Saturday, January 7, at the Budapest Jazz Club to celebrate the venue’s 15th anniversary. After its launch in 2007, the Budapest Jazz Club quickly developed into a well-known, nationally and internationally noted cultural venue and music center. According to the club, roughly 60 events have been scheduled for guests at the BJC this month.

Rippl-Rónai Receives 2nd-highest Auction Price in Hungary A painting by József Rippl-Rónai (1861-1927) fetched the second-highest price for a work sold at a Hungarian art auction in late December, according to the conservative daily Magyar Nemzet [Hungarian Nation]. A buyer paid HUF

300 million, about EUR 745,000, for “In the Garden of Geszti Castle” at an auction organized by Budapest’s Virág Judit Gallery. Bidding for the work started at HUF 160 mln. “‘Secret Isla,”

by Tivadar Csontváry Kosztka (1853-1919), holds the record for the price. That painting fetched HUF 460 mln at an auction also organized by the Virág Judit Gallery one year ago.

Cluj-Napoca State Hungarian Theater Celebrates 230th Anniversary The Cluj-Napoca State Hungarian Theater celebrated its 230th anniversary over a weekend in late December. On December 17, Cluj-Napoca celebrated with a theater walk and a talk about the history of the theater, which opened in the city on December 17, 1792. In October 1792, the “noble young actors” led by János Fejér had submitted a request to the Royal cabinet and Parliament to be able to perform plays written in Hungarian in Cluj and anywhere in Transylvania.

Hungarian Researchers Identify Previously Unknown Insect Hungarian researchers have identified a hitherto unknown, extinct insect species, a type of metallic cockroach, trapped in amber from the Late Cretaceous period from a coal swamp in Ajka (150 km southwest of Budapest), state news agency MTI reports.

According to the results published in

Socialite | 17

the scientific journal Biologia at the end of 2022, the insect, studied jointly by the staff of the Hungarian Museum of Natural Sciences, the Faculty of Science of Eötvös Loránd University (ELTE TTK), the ATK Plant Protection Institute, and the János Research Center of Szentágothai, was found near Ajka, during its former coal mining days. The age of this particular type of amber, called Ajkait, is roughly 85 million years old, and it comes from the Santonian layer of the Late Cretaceous period. The researchers determined that the insect was a member of a now-extinct family of cockroaches; the new species has been named Alienopterix santonicus.

MNB Announces 2023 Commemorative Coins The National Bank of Hungary has announced the commemorative coins it will issue in 2023 in a release on its website. The first coin of the year arrives on the day of Hungarian culture, January 23, and pays tribute to Ferenc Kölcsey and the National Anthem created on January 23, 1823. The silver version is sold at a nominal value of HUF 15,000, and the non-ferrous version at HUF 3,000. Coins can also be purchased on April 11, Hungarian Poetry Day, which celebrates the bicentenary of the writing of the National Anthem and the birth of Sándor Petőfi, as well as the 175th anniversary of the outbreak of the revolution and freedom struggle of 1848-49. The silver coin will be worth HUF 30,000, and the non-ferrous metal version HUF 7,500.

Conference Features Rebirth of Farms as Cultural Spaces The Carpathian Basin Arts Folk College will hold a conference on the rebirth of former farm buildings as cultural spaces under the title “The New Life of Barns” on January 17 in Kápolnásnyék (45 km southwest of Budapest), at the Liszt Art Gallery, according to profitline. hu. In cooperation with Transylvanian and German partners, the organization won a tender under the Creative Europe program for their project, “Barns and Barns: Quality Spaces for Housing and Culture.” The organizers say they want to contribute to creating a quality built environment in rural Europe by designing and promoting innovative and green solutions.

MBK Awards Hungarian Wine Grand Prix The 2022 Hungarian Wine Grand Prix medals have been awarded by the Circle of Hungarian Experts (MBK), according to profitline.hu. The winner of the white wine category was the 2019 Septimus Rhine Riesling from the Cseri Winery in Pannonhalma (115 km west of Budapest).

Athletes of the Year 2022 Swimmer Kristóf Milák and hurdler Luca Kozák were voted the male and female athletes of the year for 2022 at the M4 Sport Athlete of the Year gala at the Hungarian State Opera House on January 9, 2023. President Katalin Novák also handed over the lifetime achievement award of the Hungarian Sports Journalists’ Association (MSÚSZ) to Katalin Fábiánné Rozsnyói, an Olympic silver medalist kayaker and master coach. Photo by Tibor Illyés / MTI.

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A Sparkling 2023 Likely to Follow a Bubbling New Year While the New Year will have started with a bubbly bang for many lovers of Hungarian and other wines, the thirst for sparkling wine is likely to go on unabated during 2023, writes Robert Smyth.

Almost wherever you go in the wine world, wineries are keen to pull out a bottle of their own fizz to get visits off to a flying start. This is also the case in Hungary, where sparkling wine does have deep roots, thanks to József Törley, who brought savoir-faire back Budafok the opportunity to age, finish and in the early 20th century following a disgorge their traditional method stint working in Champagne. sparkling wines at his facility in Budaörs.

For the first decade and a bit of this Disgorging involves removing the dead century, the Törley company, now yeast frozen in the neck of the bottle owned by the world’s largest bubbly after the second fermentation and manufacturer, Henkell-Freixenet, set topping up with liqueur d’expedition, a the bar for modern quality sparkling wine “dosage” solution added to replace the production in Hungary, using all methods. volume lost in the process.

The hugely popular Hungária Extra The Garamvári Szőlőbirtok winery Dry, for example, is made from the in Balatonboglár (144 km southwest of transfer method (also known as Méthode Budapest by road, on the southern shore Transvasée), with the contents of the of Lake Balaton) provides the same bottle emptied into a tank following the service. Both also make high-quality second fermentation in the bottle, the traditional method wines themselves, the dead yeast filtered out, and the wine is latter on a larger scale. then bottled under pressure.

Then Kreinbacher Birtok, a winery This method is considered to give from Somló (165 km southwest of good, consistent results. However, it Budapest) raised the traditional method involves the wine being shifted around, bar by sparing no expense, both in with a slight drop off in quality and is financial and sweat equity terms, when, in therefore not deemed as good as the more expensive traditional method. Both can be called pezsgő in Hungarian. it launched a new range of sparklers; the The next development came when results have been spectacular, and go Jószef Szentesi offered smaller cellars from strength to strength.

Photo by Or Szűcs

2014,

Champaign Consultant

Not only did Kreinbacher bring in Coquard presses and Champagne yeast from France, but it also called in a Champenoise consultant in the form of Christian Forget, winemaker of Champagne Paul Bara.

Kreinbacher’s approach has been centered on the indigenous Furmint grape variety, which has proved to be excellent for making sparkling wine, with some help from the classic Champagne grape Chardonnay. Furmint also gives more of a local touch.

Its relatively neutral character ensures that the grape variety doesn’t override the final product but instead provides a carte blanche on which the complex flavors derived from the autolysis (the interaction of the dead yeast cells with the rest of the wine) can come through and give the fizz a real brioche-biscuit complexity.

Furthermore, Furmint has a high, racy acidity, prized by the makers

of sparkling wine for helping deliver mouth-watering freshness.

Kreinbacher’s sparkling wine story has been so successful that two-thirds of its output is now sparkling wine and just one-third still dry white wine, despite the winery being located in what is almost exclusively a dry white wine region. The grapes for Kreinbacher’s sparkling wine now come from several regions of Hungary.

“We’re making Hungarian traditional method sparkling wine,” explains Zoltán Prisztavok, the winery’s head of sales and marketing. He says the team can now draw on many vins clairs (wines vinified from different plots) to make the assemblage, the blend that will undergo second fermentation in the bottle.

The use of so-called Reserve wines, or vins clairs from earlier vintages, a practice typical in Champagne, which can have considerable vintage variation due to its marginal climate, is not deemed necessary in Hungary, Prisztavok adds.

Three-pronged Approach

Now, Sauska is hot on Kreinbacher’s heels and is basing its sparkling wine strategy on a three-pronged approach: the unique attributes of Tokaj; its newold aging cellar in Budafok; and the cooperation between advisor Régis Camus (the former chef de cave of Piper Heidsieck in Champagne) and a Hungarian team comprising owner Krisztián Sauska, Sauska Tokaj winemaker Gábor Rakaczki, and Budafok cellar master Ádám Hanusz.

Since 2005, Krisztián Sauska has brought renowned soil-microbiologist specialists Lydia and Claude Bourgignon to Hungary on several occasions to analyze his vineyards in Tokaj and Villány. In Tokaj, the couple found an extremely rare combination of volcanic and limestone soils conducive to growing grapes for sparkling wine.

Incidentally, Champagne is based on chalky limestone soils. The grapes for the Sauska sparklers come from vineyards which all contain limestone.

Having made a very good traditional method sparkling wine with the help of Vencel Garamvári, Sauska Tokaj started buying sparkling wine technology in 2015 and 2016. Since 2019, it has been making its own sparkling wine from grapes grown only in Tokaj: the local Furmint and Hárslevelű, and the Frenchoriginating Chardonnay and Pinot Noir, the core grapes of Champagne.

The experimental Sauska has been a champion of these foreign grape varieties in Tokaj and also bottles expressive still single vineyard Pinot Noirs. Interestingly, although Hárslevelű is an indigenous grape of Somló, Kreinbacher does not use it in its sparkling wines after trials with the grape revealed an unwanted bitterness as a sparkling wine.

Sauska vinifies its vins clairs at its cellar in Tokaj and makes the assemblage there but brings the wine for aging to its

150year-old,

10,000 sqm stretch of the Budafok cellar system. It was once part of a whopping 16 km long cellar owned by the former state winery Hungarovin. Here, ventilation is provided through vents cut into the top of the arches, with the temperature remaining between an ideal 12-16ºC (53-60ºF) and humidity at 80-82%.

Having made a very good traditional method sparkling wine with the help of Vencel Garamvári, Sauska Tokaj started buying sparkling wine technology in 2015 and 2016. Since 2019, it has been making its own sparkling wine from grapes grown only in Tokaj: the local Furmint and Hárslevelű, and the Frenchoriginating Chardonnay and Pinot Noir, the core grapes of Champagne.

Other Tokaj producers are also making taut, zesty traditional method sparklers. Dereszla Pincészet has its own sparkling wine cellar and turns out linear, focused bubblies from the Furmint and Hárslevelű grapes.

Zoltán Demeter, Kikelet, Barta, and Gróf Degenfeld have also reached consistently high quality.

Etyek, which is blessed with sparkling wine-friendly limestone soils, has also upped its game and established an association of local producers, which is focused on cooperating to develop best practices and share experiences.

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www.bbj.hu

Budapest Business Journal | January 13 – January 26, 2023

Chamber of Commerce Corner We are delighted to introduce a regular section that will feature news and events (and particularly social events) from the various international chambers of business. If you have information for this page you would like us to share with our readership, send an email in English to our editorial assistant, Annamária Bálint, at annamaria.balint@bbj.hu Canadian Chamber Holiday Tradition As an annual tradition, the Canadian Chamber of Commerce in Hungary held its Christmas reception at the Embassy of Canada in December. Celebrating the upcoming holidays while toasting successes through the year together has become a memorable event.

As tradition holds, Canada’s Ambassador to Hungary, Caroline Charette, greeted members with an inspiring speech. CCCH expressed “huge thanks” for the support of its sponsors throughout the year, as well as to members and guests for their participation. “We are looking forward to our events together in 2023,” the chamber said.

Socialite | 19

Forthcoming Event: Economic Outlook for Hungary 2023 The Netherlands-Hungarian Chamber of Commerce (Dutcham), in association with the French-Hungarian Chamber of Commerce and its partners, Swisscham, the Swedish Chamber of Commerce, and Belgabiz, will be hosting an upcoming business lunch with Minister for Economic Development Márton Nagy.

The event will be held at the Kempinski Hotel Corvinus Budapest (1051 Budapest, Erzsébet tér 7-8) on January 24, from noon until 2 p.m. (registration is from 11:30 a.m.)

The event will be held in English without translation.

Tickets will cost HUF 25,000 + VAT for members of participating chambers and HUF 37,000 Ft + VAT for non-members. The fee does not cover parking.

Cancellations can be accepted until Monday, January 16. Late cancellations or no-shows will be invoiced. For more information, contact the French chamber at info@ccifrance-hongrie.org

German Chamber Advent Networking

Swisscham Christmas Reception “We spent a great evening at Bárkert Bistro in the company of our members and partners at our Christmas reception,” says the Swiss-Hungarian Chamber of Commerce (Swisscham Hungary).

“Punch and hot chocolate awaited the guests, who soon started lively conversations with a few delicious bites. After greetings from Swiss Ambassador Jean-François Paroz, Dr. István Béres, president of our chamber, and Júlia Lipovecz, its director, in addition to networking, the raffle got a lot of attention. We

received a lot of offers from our members and partners, and we thank them for their contributions.

Through the Sharity application, our participants donated to The World is Better With you Foundation – Let’s raise children to be happy,” Swisscham adds.

If you are interested in finding out about the chamber’s upcoming events, you can do so via its email newsletter and website or by following it on social media (Facebook, LinkedIn).

To subscribe to the newsletter, please contact rendezveny@swisscham.hu.

The latest networking event of the German-Hungarian Chamber of Industry and Commerce (DUIHK) was held in December at the Kozmo Hotel Suites & Spa. DUIHK CEO Barbara Zollmann delivered a review of 2022 and outlined the chamber’s plans for its 30th anniversary in 2023.

As always, new and long-time member companies were given a chance to present themselves at the event, while the Yellowblue Force Foundation highlighted a successful fundraising campaign it ran in cooperation with DUIHK and CMS for a hospital in Kyiv.