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Economy and Banking Sector of Hungary

Hungary
Location
Central Europe
Population  (2017)
9 797 561  (0.00%)
EU Status
member since 2004
Currency
HUF (Hungarian forint)
Nominal GDP (2016)
112.4 bln EUR  (+0.03%)
Credit Ratings (as of Sep 2016)
BBB-/Ba1
Consolidated Banking Assets (2016)
108.19 bln EUR  (+5.38%)
Deposit Guarantee
100 000 EUR
Number of Banks
99

Hungary is a country in Central Europe , a member of the European Union since 2004.

Hungary is a high-income mixed economy. Major industries of the Hungarian economy include food processing, pharmaceuticals, motor vehicles, chemicals, metallurgy, machinery, and tourism.

Hungarian banking sector is dominated by foreign-controlled banks from the neighbouring countries, operating as universal banks. Along with these banks, there are regional savings and mortgage banks and building societies.

List of Banks in Hungary

National Currency

Hungarian Forint (HUF)

Exchange Rate

1 EUR = 308.51 HUF (2017-10-19)

During the last 11 years EURHUF exchange rate was within the range 231.26 - 317.06, reaching its maximum in Jun 2016 and falling to its minimum in Jul 2008.

Euro to Hungarian forint (EURHUF). Chart 1. Euro to Hungarian forint (EURHUF). Source: ECB.

GDP

Nominal GDP (2016)Nominal GDP per Capita (2016)Real GDP Growth (2016)
112.4 bln EUR  (+0.03%)11 500 EUR  (+0.03%)2.0 %  (2015: 2.9 %)

According to Eurostat, nominal GDP of Hungary in 2016 was 112.4 bln EUR.

Hungary outperforms the European Union in terms of real GDP growth with the average annual differential coming to 0.9% over the past 10 years (2006 - 2016). In 2016 real GDP growth was 2.0% which was above the Euro Area average (1.8%) and above the European Union average (1.9%). Real GDP growth in 2017 - 2022 are IMF's estimates.

Real GDP Growth in Hungary. Chart 2. Real GDP Growth in Hungary. Source: Eurostat, International Monetary Fund.

In 2016, nominal GDP per capita in Hungary was 11 500 EUR.

Hungary has a below-average level of wealth in terms of per-capita GDP at purchasing power parity (PPP); this economic welfare indicator has, on average, fell behind that of the European Union by -26.5% over the past 10 years (2006 - 2016). GDP per capita at PPP in 2017 - 2022 are IMF's estimates.

GDP Per Capita at Purchasing Power Parity in  Hungary; European Union = 100. Chart 3. GDP Per Capita at Purchasing Power Parity in Hungary; European Union = 100.

Inflation Rate

CPI, MoM (Sep 2017)CPI, YoY (Sep 2017)CPI, Year Average (2016)
0.1 %  (Aug 2017: 0.0 %)2.5 %  (Aug 2017: 2.7 %)0.4 %  (2015: 0.1 %)

According to Eurostat, inflation rate in Hungary in 2016 expressed as annual percentages of average consumer prices was 0.4% which was above the Euro Area average (0.2%) and above the European Union average (0.3%). Inflation rates in 2017 - 2022 are IMF's estimates.

Inflation Rate in Hungary. Chart 4. Inflation Rate in Hungary. Source: Eurostat, International Monetary Fund.

Unemployment Rate

Unemployment Rate (2016)
5.1 %  (2015: 6.8 %)

Government Bond Yield

Government Bond Yield (Sep 2017)
2.76 %  (Aug 2017: 3.05 %)
According to Eurostat, government bond yield in Hungary in Sep 2017 was 2.76%, compared to 3.05% in Aug 2017.
Government bond yield of Hungary. Chart 5. Government bond yield of Hungary. Source: Eurostat.

Credit Ratings (as of Sep 2016)

Fitch Moody's
BBB- (good credit quality), outlook stable Ba1 (non-investment grade speculative), outlook positive

Withholding Tax

Withholding taxes are imposed at source of income and are often applied to dividends, interest, royalties, rent and similar payments. The rates of withholding tax are often reduced by double taxation agreements.

Withholding Tax Rates in Hungary: 0.0 - 16.0%

Withholding tax rates applied on payments of interest and dividends in Hungary are shown in Table 1.

Dividends Interest
Natural person, resident 16.0 %16.0 %
Natural person, non-resident 16.0 %16.0 %
Table 1. Withholding tax rates in Hungary.

Double Taxation Agreements

Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.

DTAs of Hungary: 77 Signed Agreements

Hungary signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Albania
 Armenia
 Australia
 Austria
 Azerbaijan
 Belarus
 Belgium
 Bosnia and Herzegovina
 Brazil
 Bulgaria
 Canada
 China
 Croatia
 Cyprus
 Czech Republic
 Denmark
 Egypt
 Estonia
 Finland
 France
 Georgia
 Germany
 Greece
 Hong Kong
 Iceland
 India
 Indonesia
 Ireland
 Israel
 Italy
 Japan
 Kazakhstan
 Korea, Republic of
 Kuwait
 Latvia
 Lithuania
 Luxembourg
 Macedonia
 Malaysia
 Malta
 Mexico
 Moldova, Republic of
 Mongolia
 Montenegro
 Morocco
 Netherlands
 Norway
 Pakistan
 Philippines
 Poland
 Portugal
 Qatar
 Romania
 Russian Federation
 San Marino
 Serbia
 Singapore
 Slovakia
 Slovenia
 South Africa
 Spain
 Sweden
 Switzerland
 Thailand
 Tunisia
 Turkey
 Ukraine
 United Kingdom
 United States
 Uruguay
 Uzbekistan
 Vietnam

There are also several agreements between Hungary and other jurisdictions which were signed but haven't yet come into force (for agreements signed after after 01 January 2013 of signing the agreement is given in brackets):

 Bahrain (Feb 2014)
 Saudi Arabia (Mar 2014)
 Switzerland (Sep 2013)
 United Arab Emirates (Apr 2013)
 United States

Information Exchange

There are 3 ways for jusrisdictions to exchange information on tax matters:

  • spontaneously;
  • on request;
  • automatically.

Spontaneous exchange of information is provision of information that is forseeably relevant to another party without a request being previously sent.

Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.

Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.

Exchange on Request: 2 Signed Agreements

Hungary signed TIEAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Guernsey (Mar 2014)

There are also several agreements between Hungary and other jurisdictions which was signed but haven't yet come into force (for agreements signed after 01 January 2013 of signing the agreement is given in brackets):

 Jersey (Jan 2014)

Automatic Exchange: Starts in September 2017

Hungary signed the automatic information exchange agreement on 29 October 2014 and committed to start the automatic information exchange in September 2017.

Further Information

FATCA

Foreign Account Tax Compliance Act (FATCA) which became law in the United States in March 2010, focuses on reporting made by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. The FATCA-reporting is facilitated by Intergovernmental Agreements (IGAs).

FATCA Status in Hungary
IGA in effect since 04 February 2014, Model 1

Hungary has FATCA agreement with the U.S. in effect since 04 February 2014 (Intergovernmental Agreement Model 1). Financial institutions operating in Hungary are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years. The agreement is reciprocal: Hungarian financial accounts hold in U.S. financial institutions will be reported to Hungarian authorities.

Further Information

Financial Market Development

Financial Market Development
4.3 (max 7.0), 45th out of 138 countries
Banks' Soundness
4.7 (max 7.0), 74th out of 138 countries

According to World Economic Forum's Global Competitiveness Report 2017-2018, financial market development in Hungary is scored 4.3 out of maximum 7.0 and ranked 45th out of 138 analysed economies. Soundness of banks is scored 4.7 bringing Hungary into the 74th place, trustworthiness and confidence of financial market is scored 4.7 (39th place).

Financial Market Development in Hungary. Chart 6. Financial Market Development in Hungary. Source: WEF.

Deposit Guarantee Scheme

Maximum Protected Amount
100 000 EUR

Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.

From a depositor's point of view it is important to know:

  • if the depositor is eligible within the terms of the deposit guarantee scheme;
  • if the depositor's bank is a participant in the deposit guarantee scheme;
  • if the depositor's type of deposit is covered by the deposit guarantee scheme.

All these details about deposit guarantee scheme in Hungary are summarised in Table 2.

Scheme Participantsall credit institutions operating in Hungary (including branches of foreign banks), branches of Hungarian banks abroad
Eligible Depositorsnatural persons, legal entities
Covered CurrenciesEEA currencies
Maximum Protected Amount100 000 EUR
Paid In CurrencyHUF

Table 2. Deposit guarantee scheme in Hungary.

EEA stands for European Economic Area and consists of all EU member states plus Liechtenstein, Norway and Iceland.

EEA currencies are all official currencies of EEA members. Switzerland is not a EEA member, but because CHF is the official currency of Liechtenstein, CHF also belongs to EEA currencies.

So, only the deposits made with Hungarian banks in the following currencies are covered by the deposit guarantee scheme of Hungary

 EUREuro
 BGNBulgarian lev
 CZKCzech koruna
 DKKDanish krone
 HUFHungarian forint
 ISKIcelandic króna
 CHFSwiss franc
 NOKNorwegian krone
 PLNPolish złoty
 RONRomanian new leu
 SEKSwedish krona/kronor
 GBPPound sterling

It should be also noted that deposits in non-EEA currencies (for example, USD and JPY) are not covered by the Hungarian deposit guarantee scheme.

Further Information

Country Ceiling for Deposits

Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.

Local Currency (Hungarian forint) Foreign Currency
Baa2 (lower medium grade) Ba2 (non-investment grade speculative)

Local currency (Hungarian forint) deposit ceiling for Hungary is set to Baa2 (lower medium grade), foreign currency deposit ceiling is Ba2 (non-investment grade speculative).

Deposit Rates

Average Deposit Rate (Aug 2017, HUF)
0.30 %  (Jul 2017: 0.31 %)
In Aug 2017, an agreed annualised deposit rate in local currency (Hungarian forint) of new contracts with agreed maturity up to 1 year between credit institutions and households was 0.30% .
Deposit Rates in Hungary. Chart 7. Deposit Rates in Hungary. Source: ECB.

Banking Sector Structure

Number of Banks
99
Consolidated Assets (2016)
108.19 bln EUR  (+5.38%)
Recent Changes (2016)
new banks: 2, closed banks: 34

Currently there are 99 credit institutions operating in Hungary.

In 2016 consolidated banking assets in Hungary were 108.19 bln EUR. The consolidated banking assets' evolution is shown at Chart 8 below.

Consolidated banking assets in Hungary. Chart 8. Consolidated banking assets in Hungary.

Recent structural changes (2013 - 2016) of the banking sector of Hungary are summarised in Table 3.

2013201420152016
Number of Opened Banks0062
Number of Closed Banks005234

Table 3. Recent structural changes in the banking sector of Hungary.

The list of the most recently opened banks in Hungary is provided in Table 4.

All the credit institutions operating in Hungary can be classified into several categories. Table 5 summarises the number of banks in each category.

CategoryNumber of Banks
Banks25
Branches of foreign banks9
Central banks1
Cooperative banks1
Mortgage banks5
Savings banks58

Table 5. Number of banks by category in Hungary.

There are 9 branches of foreign banks from 7 different countries in Hungary. Table 6 shows the number of branches grouped by the country of origin.

Country of OriginNumber of Branches
 France3
 Portugal1
 Ireland1
 Netherlands1
 Austria1
 China1
 Germany1

Table 6. Number of branches of foreign banks in Hungary grouped by country of origin.