The liberalization of Hungarian telecom market attracted a number of international investors such as Deutsche Telekom, Vodafone, Telenor and UPC, which have considerably improved telecom infrastructure, providing now real effective competition and expanding coverage and quality of offered services. The market became truly dynamic only after Hungary’s accession to the European Union in 2004. The regulator, the National Communications Authority, has rigorously promoted competition, reducing interconnection tariffs and number portability fees, and has also ensured that a fair access regime is in place, with a number of LLU agreements concluded. However, new entrants in the fixed-line sector will be fighting for a shrinking market, with fixed-line numbers in decline.
Hungary suffered a historic economic contraction as a result of the global economic slowdown in 2008-09 as export demand and domestic consumption dropped, prompting it to take an IMF-EU financial assistance package. Since 2010, the government has backpedaled on many economic reforms and taken a more populist approach towards economic management. The government has favored national industries and government-linked businesses through legislation, regulation, and public procurements. Real GDP growth has been robust in the past few years due to increased EU funding, higher EU demand for Hungarian exports, and a rebound in domestic household consumption. To further boost household consumption ahead of the 2018 election, the government embarked on a six-year phased increase to minimum wages and public sector salaries, decreased taxes on foodstuffs and services, cut the personal income tax, and implemented a uniform 9% business tax for small and medium-sized enterprises and large companies. Real GDP growth slowed in 2016 due to a cyclical decrease in EU funding, but increased to 3.8% in 2017 as the government pre-financed EU funded projects ahead of the 2018 election. Systemic economic challenges include pervasive corruption, labor shortages driven by demographic declines and migration, widespread poverty in rural areas, vulnerabilities to changes in demand for exports, and a heavy reliance on Russian energy imports.