Major Economic Indicators

Recent Developments

• Hungary has been a member of the EU since May 2004, and it has adopted the EU's common external trade policy and measures.
• All Hungarian enterprises are allowed to trade freely with foreign companies. The Hungarian forint is convertible, and importers can purchase foreign currencies for import payments without limits.
• The growth of the Hungarian economy picked up slightly from 0.8% in Q4 2007 to 1.7% in Q1 2008. Despite a decline in domestic demand, the Hungarian economy is expected to maintain a relatively healthy economic performance in 2008. The increasing number of West European companies relocating to Hungary will help stimulate domestic demand, investment and employment, while still healthy demand from Western Europe will continue to support Hungarian exports.
• Hong Kong's total exports to Hungary rose by 20% to US$632 million during the first half of 2008, while its imports from Hungary surged by 38% to US$67 million.

Current Economic Situation

Hungary's economic growth picked up slightly from 0.8% in the final quarter of 2007 to 1.7% in the first quarter of 2008. But a decline in domestic demand and the government's fiscal austerity measures, such as tax increases and expenditure freezes, would likely hamper the recovery in consumer and business confidence. Externally, the weakening of global import demand is expected to decelerate Hungary's export growth, which has been one of the most important growth impetuses in the Hungarian economy.

Looking ahead, the Hungarian economy is expected to maintain a relatively healthy economic performance in 2008. The increasing number of West European companies relocating to Hungary will help stimulate domestic demand, investment and employment. On external front, still healthy demand from Western Europe will continue to support Hungarian exports, while rising corporate investment would help stimulate imports. All in all, Hungary's GDP is expected to grow by 1.8% in the whole of 2008.

Trade Policy

Hungary is a member of the World Trade Organisation (WTO). All Hungarian enterprises are allowed to trade freely with foreign companies. The Hungarian currency, namely forint, is convertible, and importers can purchase foreign currencies for import payments without limits.

As Hungary has been a member of the EU since May 2004, it has adopted the EU's common external trade policy and measures. As a result, Hungarian import tariffs have aligned with the EU tariff rates, which are generally lower than the original Hungarian rates. In addition to the EU's customs tariffs and measures, imports into Hungary are subject to a value-added tax, whose general rate is set at 20%.

Textiles and Clothing

Hong Kong's textiles and clothing exports to the EU were previously subject to the World Trade Organisation (WTO) Agreement on Textiles and Clothing (ATC), under which quantitative restrictions on textiles and clothing were eliminated completely on 1 January 2005.

Likewise, the previous quotas imposed by the EU on textiles and clothing products originating from the Chinese mainland were removed on 1 January 2005. However, as a result of the EU-China agreement reached in June 2005, the EU imposes safeguard quotas on 10 categories of Chinese textile products for the period of 2005-2007. Upon the expiry of the quotas by the end of 2007, a joint system with China has been established to monitor EU imports of Chinese textiles and apparel. This system, which will operate for one year, covers 8 out of the 10 previously restricted categories.

Non-textile Manufacturing Products

Previously, the EU also imposed Union-wide quotas on three categories of non-textile products originating from the Chinese mainland, including certain footwear, porcelain and ceramic tableware/kitchenware. But these quotas were liberalised on 1 January 2005.

Scheme of Generalised Tariff Preferences

On 1 January 2006, the EU's new scheme on a generalised system of preferences ("GSP") 2006-2008 entered into force. Under the GSP scheme, the Chinese mainland remains a beneficiary. The scheme classifies products into two categories, namely sensitive products that enjoy the benefits of reduced tariff rates by 3.5 percentage points, and non-sensitive products that enjoy total tariff suspension. But a number of mainland-origin items, including plastics and rubber, paper items, consumer electronics, timepieces, jewellery, textiles, clothing, certain chemicals, articles of leather and fur skins, footwear, glass and ceramic products, base metals, furniture, and toys, games and sporting goods, are excluded from the preference scheme. Regarding Hong Kong, the territory has been fully excluded from the EU's GSP scheme since 1 May 1998.

Anti-dumping Measures

The EU has initiated anti-dumping proceedings against certain mainland-origin products. Currently, there are a number of mainland-origin items subject to EU's anti-dumping measures, including electronic compact fluorescent lamps (definitive duty at 66.1%) and certain leather footwear (definitive duty at 16.5%), which are among the affected products of interest to Hong Kong.

Other Measures

To combat the spread of the Asian longhorn beetle, the EU introduced in July 1999 emergency controls on wooden packaging material originating in the Chinese mainland. Wood covered by the measures must be stripped of its bark and free of insect bore holes greater than 3mm across, or have been kiln-dried to below 20% moisture content.

For health reasons, the EU has adopted a Directive on the control of the use of nickel in objects intended to be in contact with the skin, such as watches and jewellery. Following the emergency ban adopted in December 1999, the EU has adopted a Directive to ban the use of some phthalates in certain PVC toys and childcare articles on a permanent basis, which will come into effect from 16 January 2007. In addition, the EU has adopted a Directive to prohibit from September 2003 the trading of clothing, footwear and other textile and leather articles which contain azo-dyes, from which aromatic amines may be derived.

On the other hand, the EU has adopted a number of Directives for environmental protection, which may have an impact on the sales of a wide range of consumer goods and consumer electronics. Notable examples include the Directive on Waste Electrical and Electronic Equipment (WEEE) implemented in August 2005, and the Directive on Restriction of Hazardous Substances (RoHS) implemented in July 2006.

On the heels of the WEEE Directive and RoHS Directive, the EU's new Directive on the eco-design of Energy-using Products (EuP) is now in place. This EuP Directive does not directly introduce binding requirements for specific products, but does define conditions and criteria for setting via subsequent measures.

Moreover, REACH, a EU Regulation, which stands for Registration, Evaluation, Authorisation and Restriction of Chemicals, entered into force in June 2007. Among others, it requires EU manufacturers and importers of chemical substances (whether on their own, in preparations or in certain articles) to gather comprehensive information on properties of their substances produced or imported in volumes of 1 tonne or more per year, and to register such substances prior to manufacturing in or import into the EU.

Hong Kong's Trade with Hungary ^

Hungary is by far the largest export market of Hong Kong in Central and Eastern Europe. Hong Kong's total exports to Hungary rose by 20% to US$632 million during January-June 2008, after growing by 18% to US$1,152 million in 2007. Major export items to Hungary included telecommunications equipment and parts (48% share of the total), semiconductors, electronic valves/tubes (10%), electrical apparatus for electrical circuits (8%), parts and accessories of office machines/computers (7%), and electric power machinery and parts (7%).

Meanwhile, Hong Kong's imports from Hungary surged by 38% to US$67 million during January-June 2008, after a 67% increase to US$117 million in 2007. Major import items included parts and accessories of office machines/computers (29% share of the total), telecommunications equipment and parts (16%), and semiconductors and electronic valves/tubes (13%).

^ Since offshore trade has not been recorded by ordinary trade figures, these numbers do not necessarily reflect the export business managed by Hong Kong companies.