Businesses will face a tougher environment in Hungary

Significance

Orban's government is hiking taxes on several sectors to plug a widening fiscal deficit, amid concern that the country will not receive substantial EU funding. Unpredictable taxation on multinationals and anti-EU rhetoric are making Western companies wary of investing in Hungary.

Impacts

• The forint exchange rate will largely depend on whether the inflow of EU funds due to Hungary is eventually interrupted.
• Market confidence will hold up despite funds being suspended, but will evaporate if substantial funds are lost.
• Government anti-EU rhetoric may erode the EU’s relatively high popularity, with polls showing support falling over April-December.
• Confidence that Hungary is going in the right direction is also eroding, having fallen sharply to 27% from 51% since April elections.