Hungary's heavy reliance on the German economy, particularly its automotive sector, has rendered it vulnerable as Germany enters a technical recession.

The Hungarian government is now focusing on attracting investments from dynamic Asian economies to compensate for this decline.

Recent analyses indicate that while the government has implemented various investment incentives aimed at drawing foreign capital—primarily from Asian sources—there are growing concerns regarding the effectiveness and sustainability of these measures.

Critics argue that these incentives impose disproportionate costs on the budget with minimal economic returns, claiming that much of the financial support may be wasted public funds.

In 2024, Hungary allocated 4,000 billion HUF to support investments, of which a significant majority—80 percent—benefitted companies from China, Japan, and South Korea, notably with seven Chinese companies accounting for half of the total subsidies.

Meanwhile, since 2022, the volume of incoming investments has been declining.

Critics often highlight that supported companies frequently exploit local labor, generate low added value, and do not substantially contribute to the technological advancement of the domestic industry.

They contend that such companies prioritize their own interests, resulting in local economic benefits not meeting the scale of state assistance.

However, Hungary's economic structure has long relied on the German industrial sector, particularly automotive manufacturing.

As Germany struggles with rising energy prices, declining demand, and global economic uncertainties—having experienced technical recession by the end of 2023—Hungarian exports, which depend heavily on the German market, are at risk.

Approximately 25 percent of Hungary's exports are directed to Germany, indicating that the German economic challenges could significantly impact Hungary’s GDP and employment.

In this context, the influx of Asian investments could open new avenues for Hungarian exports, contribute to GDP growth, and enhance economic resilience.

The Hungarian National Bank and government anticipate that the economy could grow by 3-4 percent in 2025, largely reliant on foreign investment.

This raises the question of the extent to which Asian investments can compensate for the decline in German support while presenting new growth opportunities for Hungary.

The government has identified attracting Asian investments, particularly in the battery and electric vehicle sectors, as a strategic priority.

Noteworthy among these investments is the Chinese BYD factory in Szeged, which is expected to invigorate the local economy and create approximately 10,000 jobs with average salaries significantly above local norms, ranging from 1,800 to 2,000 euros.

Moreover, the presence of Asian corporations could elevate the technological standards within the Hungarian economy, as evidenced by the Chinese CATL battery factory in Debrecen.

With an investment of 7.3 billion euros, this facility is anticipated not only to enhance local industrial capacity but also to bolster global competitiveness through the adoption of cutting-edge technologies.

Such investments are projected to create not only manufacturing capabilities but also facilitate knowledge transfer.

Hungary stands at a crossroads, and the magnitude of Asian investments will play a crucial role in determining whether they can stabilize and propel the economy on a growth trajectory in the long term.