Businesses alarmed as Hungary plans to stop issuing visas to non-EU workers

BUDAPEST- Hungary's new government faces mounting pressure to rethink a planned halt to non-EU worker visas, with companies and business groups warning an abrupt ban could hit output in an already tight labour market.

Prime Minister Peter Magyar's Tisza party, which ended right-wing leader Viktor Orban's 16-year rule in an April 12 election landslide, has said it would stop issuing visas to workers from outside the European Union from next month.

"We will not allow foreign guest workers to take the jobs of Hungarians and push down salaries," Tisza said in its manifesto, raising alarm among some of Hungary's largest foreign investors.

The regional head of staffing firm Randstad warned that an outright ban could strain companies dependent on foreign labour.

"An outright ban on workers from outside the EU would not be viable in the long run," said Sandor Baja, Randstad's managing director for the Czech Republic, Hungary and Romania, noting that large swathes of Hungary's workforce are set to retire in the next decade.

"I sincerely hope that (economy minister Istvan) Kapitany's team will allow economic rationality to prevail here," Baja told Reuters on Friday.

Foreign workers account for just 2% of Hungary's workforce based on official statistics. Unlike Germany, Poland or the Czech Republic, Hungary has not seen a large-scale inflow of Ukrainian refugees to help shore up its labour market.

However certain sectors, such as manufacturing and services, are heavily reliant on foreign workers, business leaders say.

Akos Janza, president of the American Chamber of Commerce, said foreign workers - both white and blue collar - account for up to 20% of workers at some companies.

"We have a member company, which would have to cut a full shift (without guest workers)," Janza said on Friday, adding that the company worked in manufacturing, a key sector in Hungary.

Baja said Hungarians under 25, those over 55 and residents of smaller towns represent an untapped pool of around 400,000 workers, but mobility constraints limit how far this could ease shortages.

Robert Keszte, head of the German business chamber in Hungary, warned the plan to halt visas would hit the economy hard.

"In our view, the Hungarian economy cannot currently function without workers from third countries (outside the EU)," he said last week.

-Reporting by Gergely SzakacsEditing by Ros Russell/Reuters