NationMaster - Encyclopedia: Economy of Hungary

The Hungarian economy prior to WWII was primarily oriented toward agriculture and small-scale manufacturing. Hungary's strategic position in Europe and its relative high lack of natural resources also have dictated a traditional reliance on foreign trade. In the early 1950s, the communist government forced rapid industrialization after the standard Stalinist pattern in an effort to encourage a more self-sufficient economy. Most economic activity was conducted by state-owned enterprises or cooperatives and state farms. In 1968, Stalinist self-sufficiency was replaced by the "New Economic Mechanism," which reopened Hungary to foreign trade, gave very limited freedom to the workings of the market, and allowed a limited number of small businesses to operate in the services sector. German soldiers at the Battle of Stalingrad World War II was the most extensive and costly armed conflict in the history of the world, involving the great majority of the worlds nations, being fought simultaneously in several major theatres, and costing tens of millions of lives. ... Europe is conventionally considered one of the seven continents which, in this case, is more a cultural and political distinction than a physiogeographic one. ... Stalinism is a brand of political theory, and the political and economic system implemented by Joseph Stalin in the Soviet Union. ...

Although Hungary enjoyed one of the liberal and economically advanced economies of the former Eastern bloc, both agriculture and industry began to suffer from a lack of investment in the 1970s, and Hungary's net foreign debt rose significantly—from $1 billion in 1973 to $15 billion in 1993—due largely to consumer subsidies and unprofitable state enterprises. In the face of economic stagnation, Hungary opted to try further liberalization by passing a joint venture law, enstating an income tax, and joining the International Monetary Fund (IMF) and the World Bank. By 1988, Hungary had developed a two-tier banking system and had enacted significant corporate legislation which paved the way for the ambitious market-oriented reforms of the post-communist years. The logo of the International Monetary Fund (IMF) The International Monetary Fund (IMF) is the international organization entrusted with overseeing the global financial system by monitoring exchange rates and balance of payments, as well as offering technical and financial assistance when asked. ... Logo of the World Bank The International Bank for Reconstruction and Development (IBRD, in Romance languages: BIRD), better known as the World Bank, is an international organization whose original mission was to finance the reconstruction of nations devastated by WWII. Now, its mission has expanded to fight poverty by means...

The Antall government of 1990–94 began market reforms with price and trade liberation measures, a revamped tax system, and a nascent market-based banking system. By 1994, however, the costs of government overspending and hesitant privatization had become clearly visible. Cuts in consumer subsidies led to increases in the price of food, medicine, transportation services, and energy. Reduced exports to the former Soviet bloc and shrinking industrial output contributed to a sharp decline in GDP. Unemployment rose rapidly—to about 15% in 1993. The external debt burden, one of the highest in Europe, reached 250% of annual export earnings, while the budget and current account deficits approached 10% of GDP. In March 1995, the government of Prime Minister Gyula Horn implemented an austerity program, coupled with aggressive privatization of state-owned enterprises and an export-promoting exchange raw regime, to reduce indebtness, cut the current account deficit, and shrink public spending. By the end of 1997 the consolidated public sector deficit decreased to 4.6% of GDP—with public sector spending falling from 62% of GDP to below 50%—the current account deficit was reduced to 8% of GDP, and government debt was paid down to 94% of annual export earnings. Jozsef Jr. ... Gyula Horn (born in July 5, 1932, Budapest) is a Hungarian politician, having been Prime Minister of Hungary 1994-1998 leading the socialist-liberal coalition. ...

The Government of Hungary no longer requires IMF financial assistance and has repaid all of its debt to the fund. Consequently, Hungary enjoys favorable borrowing terms, and its sovereign foreign currency debt issuances carry investment-grade ratings with positive outlooks from all major credit-rating agencies. In 1995 Hungary's currency, the forint (HUF), became convertible for all current account transactions, and subsequent to OECD membership in 1996, for almost all capital account transactions as well. Since 1995, Hungary has pegged the forint against a basket of currencies (in which the U.S. dollar is 30%), and the central rate against the basket is devalued at a preannounced rate, currently set at 0.8% per month. The government privatization program will end on schedule in 1998: 80% of GDP is now produced by the private sector, and foreign owners control 70% of financial institutions, 66% of industry, 90% of telecommunications, and 50% of the trading sector. The Organization for Economic Co-operation and Development (OECD) is an international organization of those developed countries that accept the principles of representative democracy and a free market economy. ...

After Hungary's GDP declined about 18% from 1990 to 1993 and grew only 1%–1.5% up to 1996, strong export performance has propelled GDP growth highest to 4.4% in 1997, with other macroeconomic indicators similarly improving. These successes allowed the government to concentrate in 1996 and 1997 on major structural reforms such as the implementation of a fully funded pension system, reform of higher education, and the creation of a national treasury. Remaining economic challenges include reducing fiscal deficits and inflation (expected to fall to 13% by the end of 1998), maintaining stable external balances, and completing structural reforms of the tax system, health care, and local government financing. Recently, the overriding goal of Hungarian economic policy has been to prepare the country for entry into the European Union, which it joined in late 2004.

Prior to the change of regime in 1989, 65% of Hungary's trade was with Comecon countries. By the end of 1997, Hungary had shifted much of its trade to the West. Trade with EU countries and the OECD now comprises over 70% and 80% of the total, respectively. Germany is Hungary's single most important trading partner. The U.S. has become Hungary's sixth-largest export market, while Hungary is ranked as the 72d largest export market for the U.S. Bilateral trade between the two countries increased 46% in 1997 to more than $1 billion. The U.S. has extended to Hungary most-favored-nation status, the Generalized System of Preferences, Overseas Private Investment Corporation insurance, and access to the Export-Import Bank. Though with some reservations, two thirds of the population became reconciled to the economy based on private ownership, but many people are unhappy about losing the advantages of "attentive" state. Although the majority of the population does not question the necessity of capitalism, the opinions about the need for decreasing the differences in incomes are almost homogeneous. It can be regarded as a hopeful sign that the majority of those who say that in the Kadar era people lived better than today acknowledge the priority of private ownership. A Soviet poster reading COMECON: Unity of Goals, Unity of Action The Council for Mutual Economic Assistance (COMECON / Comecon / CMEA / CEMA), 1949 – 1991, was an economic organisation of communist states and a kind of Eastern European equivalent to the European Economic Community. ... Motto: E pluribus unum (1789 to 1956) (Latin: Out of Many, One) In God We Trust (1956 to present) Anthem: The Star-Spangled Banner Capital Washington, D.C. Largest city New York City Official language(s) None at federal level; English de facto Government â€¢ President â€¢ Vice President Federal republic George... The Export-Import Bank of the United States (â€œEx-Im Bankâ€, â€œExim Bankâ€ or â€œEximbankâ€) is an independent bank established by Congress that finances or insures foreign purchases of U.S. goods for customers unable or unwilling to accept credit risk. ... JÃ¡nos KÃ¡dÃ¡r JÃ¡nos KÃ¡dÃ¡r, nÃ© JÃ¡nos Csermanek (May 26, 1912â€“July 6, 1989), was the leader of Hungary from 1956 to 1988, and twice served as Prime Minister of Hungary, from 1956 to 1958 and from 1961 to 1965. ...

With about $8 billion in foreign direct investment (FDI) since 1989, Hungary has attracted over one-fifth of all FDI in central and eastern Europe, including the former Soviet Union. Of this, about $4 billion came from American companies. In establishing the market supporter attitude the biggest weight is carried by accepting the existence of poverty, while in the formation of anti-market attitude the standard of living in the Kadar era and the nostalgia towards socialism as a social system play the greatest parts. Corruption has been one of the pervasive problems affecting Hungary, along with many developing countries, which has taken the form of bribes, evasion of tax and exchange controls, embezzlement, etc. The economic reforms of 2001 reduced the red tape, bureaucracy and the government that had strangled private enterprise and was blamed for the corruption and inefficiencies. Yet, a 2005 study by Transparency International (TI) Hungary found that more than half of those surveyed had firsthand experience of paying bribe or peddling influence to get a job done in a public office. JÃ¡nos KÃ¡dÃ¡r JÃ¡nos KÃ¡dÃ¡r, nÃ© JÃ¡nos Csermanek (May 26, 1912â€“July 6, 1989), was the leader of Hungary from 1956 to 1988, and twice served as Prime Minister of Hungary, from 1956 to 1958 and from 1961 to 1965. ... Bribery is the practice of offering a professional money or other favours in order to circumvent ethics in a variety of professions. ... This article contrasts tax evasion, tax avoidance, tax resistance and tax mitigation. ...

Statistics

GDP - composition by sector:
agriculture: 3,3%
industry: 32,5%
services: 64,2% (2000 est.)

Household income or consumption by percentage share:
lowest 10%: 4%
highest 10%: 21% (1998)

Distribution of family income - Gini index: 24 (1998) The Gini coefficient is a measure of inequality developed by the Italian statistician Corrado Gini and published in his 1912 paper Variabilità e mutabilità. It is usually used to measure income inequality, but can be used to measure any form of uneven distribution. ...

Labor force - by occupation: services 65%, industry 27%, agriculture 8% (1996)

Electricity - production by source:
fossil fuel: 59%
hydro: 1%
nuclear: 40%
other: 0% (2000 est.)

Agriculture - products: wheat, corn, sunflower seed, potatoes, sugar beets; pigs, cattle, poultry, dairy products

Exports - commodities: machinery and equipment 57.6%, other manufactures 31.0%, food products 7.5%, raw materials 1.9%, fuels and electricity 1.9% (2001)

Exports - partners: Germany 34.1%, Austria 8%, Italy 5.8%, France 5,7%, UK 4.5%, Netherlands 4,1% (2003)

Imports - commodities: machinery and equipment 51.6%, other manufactures 35.3%, fuels and electricity 8.2%, food products 2.9%, raw materials 2.0% (2001)

Imports - partners: Germany 24.5%, Italy 7.1%, China 6.9%, Austria 6.3%, Russia 6.2%, France 4,8%, Japan 4,2% (2003)

Exchange rates: forints per U.S. dollar - 224.307 (2003), 257.887 (2002), 286.490 (2001), 282.179 (2000), 237.146 (1999), 214.402 (1998), 186.789 (1997)

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