CEE Meeting Ljubljana The Hungarian Experience Andras Temmel Secretary General

I. Political-economical background 1. Elections in 2014: 2/3 majority again for Fidesz government  Economical consolidation, moderate growth (2-3%)  Stabilized budget deficit (constantly below 3%) and debt (around %/GDP)  No big changes in taxation system – extraordinary taxes seem to remain (bank tax, telecom tax etc.)  High VAT (27%), low tax rate on personal income (16%) and on company profits (10% til 1,5 mEur and 19% above), massive tax benefits after children (e.g. 3 children, til 2 th Eur/month – 0% tax)  Supported groups: upper-middle class with children, pensioners 2. Controversial political steps  New tobacco distribution system – „trafics/shops for friends”  Privatization of big state owned agricultural fields  Unexpected split in the Fidesz party – braking with the oldest friend and oligarch  Clear signs of corruption – no steps against it  The radical right party (Jobbik) is coming up – 2 interval elections won – 2/3 majority gone  Socialist party: no recovery  New era: migration problem –vast majority of the society is supporting Orban 2 2

II. Economic overview Basic indicators:  GDP: moderate growth  Unemployment rate is decreasing, but mainly thanks to social work programs.  Slight growth in consumption, still industry and export driven economic growth  Huge surplus in the foreign trade in past 4 years (6-7% of the GDP) and in foreign fiscal balance (1-2%)  All time high currency reserves enabled the termination of households foreign currency loans – very lucky timing  Budget deficit below 3% - but gov. bonds still rated under investment grade – revision is expected Q12015 Q2 GDP3,6%3,5%2,7% Investment15,8%-3,9%5,7% Households consuption1,5%2,6% Budget deficit-2,6%-2,0%na Unemployment rate7,8%6,9%6,8% Employment rate61,8%63,8%64,1% Industrial production7,7%11,0%3,4% Trade surplus / GDP6,3% Consumer prices-0,2%0,6%0,4%

But what could feel the average people? Real personal income per capita (1990=100%) 4 4

2. Financial status of households  Considerable growth in savings, massive loan repayment  The attitude towards savings has changed dramatically: high willingness for saving more, but only a relatively small part of the society can do it.  Fundamental changes on the savings market – winners: government bonds, investment funds and recently pension savings insurances 5 5

6 6 III. Consequences on fund business

7 7 From the beginning…

8 8 Big changes in the market share of different categories

Thank you! 9 9