After relaxing immigration rules so that companies could hire their workers from third countries in the summer to meet the growing demand from new EV battery factories, Viktor Orban's radical rightwing government is set to tighten the rules again after coming under pressure from its electoral base.

The revision of the legislation suggests that the government has become a prisoner of its own anti-migrant campaign and  that it prefers  political expediency to the country's economic interests, according to local media. Fidesz has lost some 500,000 voters since the election and it aims to shore up its base before the 2024 EP and local government elections, according to some analysts.

The Economic Development Ministry confirmed media reports earlier this week on the impending change in the regulations.

In the statement, it pointed to a need for "broad intervention" with regard to the rules on residence and employment in Hungary for nationals of countries outside the European Union, and said the government would draft new legislation on the matter after a "thorough review" of existing rules.

The draft legislation will send a clear message to nationals from non-EU countries that they may temporarily reside and work in Hungary only by complying fully with the designations and conditions determined by the state. Demand for labour needs to be met by "activating Hungary's workforce reserve and drawing in job-seekers and economically inactive people", the ministry said.

Non-EU nationals may be allowed to work in Hungary only if positions can't be filled by Hungarians, it added. Provisions in legislation on guest workers earlier approved by lawmakers will not come into force until the new rules are drafted, the ministry said.

The current rules, approved in June, stipulate that guest workers may stay in the country for up to two years, with the chance for a one-year extension, and they may resubmit their application to remain in the country at the end of the three-year period. The law allows the government to lay down detailed rules regarding guest workers, set annual thresholds and determine a list of countries from which guest workers may come by decree.

Industrial leaders have been calling for years to ease legislation to address the dire labour shortage in the manufacturing, construction and lately in the service sectors that could be a huge constraint on future growth. These calls were shrugged off the table as Orban has turned the 2015 migration crisis into a political weapon against his opponents in Hungary and in the EU and used anti-migrant sentiment to win elections.  

The prime minister apparently took a U-turn earlier this year in a speech at the annual economic year-opener conference, when he made the case for increasing the labour force by 500,000 in the years to come.

Orban did not openly say Hungary needed foreign workers to meet the needs of new EV battery factories. He initially argued for mobilising the domestic workforce and relying on ethnic Hungarians in neighbouring countries before opening the door to guest workers, coming mainly from Asia.

The labour market remains tight, with employment hovering near a record 4.7mn and the jobless rate around 4%. The dire labour shortage in the near term is set to worsen due to failing demographics. The number of active workers is decreasing at a pace of 30,000-40,000 annually and by the end of 2030, Hungary's active labour pool will shrink by 300,000.

According to analysts, Hungary’s labour reserve is around 100,000-150,000 at best, and the remaining 300,000 could only be met by foreigners to meet the 500,000 target. At present, around 100,000 non-EU citizens are working in the manufacturing and construction sectors.

The Orban government has embarked on a massive industrial development scheme and set the strategic goal of turning the country into a hub for EV battery production. In the next years, five of the world’s 10 largest producers will establish a base in the country.  CATL, the leading global supplier, is investing €7.34bn in eastern Hungary.

The jobless rate is around double the 4% rate in the country’s less developed regions in eastern Hungary, and experts say that filling the jobs with locals there will be impossible.

The arrival of foreign workers in Debrecen has sparked conflicts in the area where they are being accommodated. Locals in the spa town of Hajduszoboszlo, 20km southwest of Debrecen, have protested against the influx of mainly Asian foreign workers and the town’s mayor called for listing residents who rent their homes.

Unnamed sources speaking to 24.hu said the legislation easing rules on foreign workers is going to be reversed because the government has faced strong social resistance. One of the sources said the government's anti-migrant campaign over the past eight years "has been too successful, making it difficult to change public sentiment".