Economic overview Hungary, in 36 editions.

Hungary's postwar Communist government spurred the movement from a predominantly agricultural to an industrialized economy. The share of the labor force in agriculture dropped from over 50% in 1950 to under 20% in 1989. Agriculture nevertheless remains is an important sector, providing sizable export earnings and meeting domestic food needs. Industry accounts for about 40% of GNP and 30% of employment. Nearly three-fourths About 40% of Hungary's foreign trade is with the USSR and Eastern Europe. Europe and a third is with the EC. Low rates of growth reflect the inability of the Soviet-style economy to modernize capital plant and motivate workers. GNP grew about declined by 1% in 1988 1989 and declined by 1% an estimated 6% in 1989. 1990. Since 1985 external debt has more than doubled, to nearly over $20 billion. In recent years Hungary has moved further than any other East European country in experimenting experimented widely with decentralized and market-oriented enterprises. These experiments have failed The newly democratic government has renounced the Soviet economic growth model and plans to jump-start open the economy because of: limitations to wider market forces and to much closer economic relations with Western Europe. Prime Minister Antall has declared his intention to move foward on funds for privatization; continued subsidization privatization of insolvent state enterprises; enterprises, provision for bankruptcy, land reform, and the leadership's reluctance to implement sweeping market reforms that would cause additional social dislocations in marketization of international trade, but concerns over acceptable levels of unemployment and inflation may slow the short term. reform process.

Hungary is in the midst of a difficult transition between from a command and to a
market
economy. Agriculture is an important sector, providing sizable export
earnings and meeting domestic food needs. Industry accounts for about 40% of
GDP and 30% of employment. Hungary claims that less than 20% 25% of foreign
trade is now with former CEMA countries, while about 70% is with OECD
members. Hungary's economic reform programs during the Communist era gave it
a head start in creating a market economy and attracting foreign investment.
In 1990, 1991, Hungary received half 60% of all foreign investment in Eastern Europe Europe,
and in 1991 1992 received the largest single share. The growing private sector
accounts for one-quarter to about one-third of national output according to
unofficial
estimates. Privatization of state enterprises is progressing,
although
excessive redtape, red tape, bureaucratic oversight, and uncertainties about
pricing
have slowed the process. Escalating unemployment and high rates of
inflation
may impede efforts to speed up privatization and budget reform,
while
Hungary's heavy foreign debt will make the government reluctant to
introduce
full convertability convertibility of the forint before 1993. 1994 and to rein in inflation. The
government is projecting an end to the 5-year recession in 1993, and GDP is
forecast to grow 0%-3%.

Hungary, Hungary probably had the most Western-oriented
economy in East Europe before the transition to a market system
began
in 1990, and Budapest made good progress in the initial years of
transition. The reform process slowed in 1993-94, however, in part
because of the May 1994 elections and the resulting change in
government. By 1994 the privatization of state firms had ground to a
halt, while both the budget and current account deficits soared to
unsustainable levels - about 8% and 10% of GDP, respectively. The
situation improved sharply in 1995; 1995: an austerity program introduced
in
March reduced both deficits, deficits; and a renewed privatization effort
later
in 1995 the year resulted in more than $3 billion worth of sales of
state
firms to foreign investors - money that will be used mostly to reduce
Hungary's
large foreign debt. As for other macroeconomic
developments, real Real GDP increased 2.9% in 1994 - following several
several years of steep decline - and about 1.5% in 1995. Unemployment 1995 and only 0.5%
in 1996. Unemployment reached 14% in early 1993 before gradually
falling back to 10% 11% in
1995. 1996. Inflation has oscillated; it reached 40%
in mid-1991, dropped
to 17% in early 1994, and then jumped back to 31% by mid-1995.
mid-1995, and settled at 20% in 1996. Prospects for 1996 1997 and 1998 are good.
good compared with the situation earlier. Most forecasters expect 2%
to 3% GDP growth in 1997 and slightly higher growth in 1998. Inflation
and unemployment are edging down. With the government still committed to
austerity, to reform, both the budget and current account deficits should fall are at IMF
to target levels - about 4% of GDP. Economic growth Budapest also is expected to be about 2% making good progress
in restructuring the pension, health, tax, education, and other
unemployment at about 10%, with inflation falling systems as part of the effort to 20% by yearend. decrease the role of government. This
In March dramatic shift in economic policy was rewarded in 1996 by the IMF IMF,
which finally signed a new the standby loan agreement with
Budapest, Budapest had sought, and by
the OECD approved Hungary's application for admission. OECD, which welcomed Hungary as a member.

Hungary has consolidated its March 1995
stabilization program and undergone enough restructuring to become an
an established market economy. The country appears to have entered a
period of sustainable growth, gradually falling inflation, and stable
stable external balances. The government's main economic priorities
are to
complete structural reforms, particularly the implementation
of the
1997 pension reform act (the first in the region), taxation reform,
reform, and planning for comprehensive health care, local government finance
finance reform, and the reform of education at all levels. Foreign investment
investment has totaled more than $17 billion through 1997. 1998. In
recognition of
Hungary's improved macro-economic macroeconomic situation, all major credit-rating
credit-rating agencies listed the country's foreign currency debt
issuances as
investment grade in 1996. The current IMF stand-by
arrangement expired
in February 1998, and Budapest and the IMF agree
that there is no need
to renew it. The OECD welcomed Hungary as a
member in May 1996, and in
December 1997 the EU invited Hungary to
begin the accession process.
Forecasters expect 4%-5% growth in 1998. 1999.

Hungary continues to demonstrate strong economic growth and to work toward accession to the European Union. Over 85% The private sector accounts for over 80% of the economy has been privatized. GDP. Foreign ownership of and investment in Hungarian firms has been widespread is widespread, with cumulative foreign direct investment $21 totaling $23 billion by 1999. 2000. Hungarian sovereign debt is now rated investment grade. GDP growth of 4% was upgraded in 1999 will likely be matched or even exceeded 2000 to the second-highest rating among all the Central European transition economies. Inflation - a top economic concern in 2000. Inflation, while diminished, 2000 - is still high at 10%. almost 10%, pushed upward by higher world oil and gas and domestic food prices. Economic reform measures include regional development, encouragement of small- and medium-size enterprises, such as health care reform, tax reform, and support of housing. local government financing have not yet been addressed by the ORBAN government.

Hungary continues to demonstrate strong economic growth and to work toward accession to the European Union. The private sector accounts for over 80% of GDP. Foreign ownership of and investment in Hungarian firms is widespread, with cumulative foreign direct investment totaling more than $23 billion by 2000. since 1989. Hungarian sovereign debt was upgraded in 2000 to the second-highest rating among all the Central European transition economies. Inflation and unemployment - a top economic concern both priority concerns in 2000 2001 - is still high at almost 10%, pushed upward by higher world oil and gas and domestic food prices. Economic reform measures such as health care reform, tax reform, and local government financing have not yet been addressed by declined substantially. The key short-term issue is the ORBAN government. reduction of the public sector deficit from its current 6% of GDP to 4.5% in 2003 and 3% in 2004.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income one-half that of the Big Four European nations. Hungary continues to demonstrate strong economic growth and to work toward accession to the European Union. Union in May 2004. The private sector accounts for over 80% of GDP. Foreign ownership of and investment in Hungarian firms is are widespread, with cumulative foreign direct investment totaling more than $23 billion since 1989. Hungarian sovereign debt was upgraded in 2000 to the second-highest rating among all the Central European transition economies. Inflation and unemployment - both priority concerns in 2001 - have has declined substantially. The key short-term issue substantially, from 14% in 1998 to 4.7% in 2003; unemployment has persisted around the 6% level. Germany is by far Hungary's largest economic partner. Short-term issues include the reduction of the public sector deficit from its current 6% of GDP to 4.5% 3% in 2003 2004 and 3% avoiding unjustified increases in 2004. wages.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income one-half that of the Big Four European nations. Hungary continues to demonstrate strong economic growth and to work toward accession to joined the European Union in May 2004. The private sector accounts for over 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment totaling more than $23 billion since 1989. Hungarian sovereign debt was upgraded in 2000 to the second-highest rating among all the Central European transition economies. Inflation has declined substantially, from 14% in 1998 to 4.7% in 2003; unemployment has persisted around the 6% level. Germany is by far Hungary's largest economic partner. Short-term issues include the reduction of the public sector deficit to 3% in 2004 and avoiding unjustified increases in wages. further increasing the flexibility of the labor markets.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income one-half that of the Big Four European nations. Hungary continues to demonstrate strong economic growth and joined acceded to the European Union in May 2004. The private sector accounts for over 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment totaling more than $23 billion since 1989. Hungarian sovereign debt was upgraded in 2000 to and together with the second-highest Czech Republic holds the highest rating among all the Central European transition economies. economies; however, ratings agencies have expressed concerns over Hungary's unsustainable budget and current account deficits. Inflation has declined substantially, from 14% in 1998 to 4.7% 7% in 2003; unemployment 2004. Unemployment has persisted around the 6% level. level, but Hungary's labor force participation rate of 57% is one of the lowest in the OECD. Germany is by far Hungary's largest economic partner. Short-term issues Policy challenges include the reduction of cutting the public sector deficit and further increasing the flexibility to 3% of the labor markets. GDP by 2008, from about 5% in 2004, and orchestrating an orderly interest rate reduction without sparking capital outflows.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income one-half that about 60% of the Big Four European nations. EU-25 average. Hungary continues to demonstrate strong economic growth and acceded to the European Union EU in May 2004. The private sector accounts for over 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment totaling more than $23 $34 billion since 1989. Hungarian sovereign debt was upgraded in 2000 between 1990 and together with the Czech Republic holds the highest rating among the Central European transition economies; however, 2003. Several private sector analysts and sovereign ratings agencies have expressed concerns over Hungary's unsustainable budget and current account deficits. Inflation has declined from 14% in 1998 to 7% 3.5% in 2004. 2005. Unemployment has persisted around the 6% level, but in 2005 rose to 7.1%, its highest point since 1999; Hungary's labor force participation rate of 57% is one of the lowest in the OECD. Organization for Economic Cooperation and Development (OECD). Germany is by far Hungary's largest economic partner. Policy challenges include cutting the public sector deficit to 3% of GDP by 2008, from about 5% 6.1% in 2004, 2005, and orchestrating an orderly interest rate reduction without sparking capital outflows.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income about 60% nearly two-thirds that of the EU-25 average. Hungary continues to demonstrate strong economic growth and acceded to the EU in May 2004. The private sector accounts for over 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment totaling more than $34 $60 billion between 1990 and 2003. Several private sector analysts and since 1989. Hungary issues investment-grade sovereign ratings agencies debt. International observers, however, have expressed concerns over Hungary's unsustainable budget fiscal and current account deficits. Inflation has declined from 14% in 1998 to 3.5% 3.7% in 2005. 2006. Unemployment in 2005 rose to 7.1%, its highest point since 1999; has persisted above 6%. Hungary's labor force participation rate of 57% is one of the lowest in the Organization for Economic Cooperation and Development (OECD). Germany is by far Hungary's largest economic partner. Policy challenges include cutting the public sector deficit to 3% of GDP by 2008, from about 6.1% 6.5% in 2005, 2006, and orchestrating tackling a persistent trade deficit. The current government has announced and begun to implement an orderly interest rate reduction without sparking capital outflows. austerity program designed to address these issues, leading to eventual adoption of the euro.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-25 average. Hungary continues to demonstrate strong economic growth and acceded to the EU in May 2004. The private sector accounts for over more than 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment totaling more than $60 billion since 1989. Hungary issues investment-grade sovereign debt. International observers, however, have expressed concerns over Hungary's fiscal and current account deficits. In 2007, Hungary eliminated a trade deficit that had persisted for several years. Inflation has declined from 14% in 1998 to a low of 3.7% in 2006. 2006, but jumped to 7.8% in 2007. Unemployment has persisted above 6%. Hungary's labor force participation rate of 57% is one of the lowest in the Organization for Economic Cooperation and Development (OECD). Germany is by far Hungary's largest economic partner. Policy challenges include cutting the public sector deficit to 3% 4% of GDP by 2008, from about 6.5% 6% in 2006, 2007. The government's austerity program of tax hikes and tackling a persistent trade deficit. subsidy cuts has reduced Hungary's large budget deficit, but the reforms have dampened domestic consumption, slowing GDP growth to about 2% in 2007. The current government has announced and begun will need to implement an austerity program designed pass additional reforms to address these issues, leading ensure the long-term stability of public finances. The government plans to eventual adoption eventually lower its public sector deficit to below 3% of GDP to adopt the euro.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-25 average. The private sector accounts for more than 80% of GDP. Foreign ownership of and investment in Hungarian firms is are widespread, with cumulative foreign direct investment totaling worth more than $200 billion since 1989. $70 billion. The government's IMF-mandated austerity measures, imposed since late 2006, have reduced the budget deficit from over 9% of GDP in 2006 to 3.3% 3.8% in 2008. 2010. Hungary's impending inability to service its short-term debt - brought on by the global credit crunch financial crisis in late 2008 - led Budapest to seek and receive obtain an IMF-arranged financial assistance package worth over $25 billion. The global financial crisis, economic downturn, declining exports, and low domestic consumption and fixed asset accumulation, dampened by government austerity measures, will result resulted in an economic contraction of 6.3% in 2009. The economy rebounded in 2010 with a negative big boost from exports, and growth rate of about -1.5% to -2.5% more than 2.5% is expected in 2009. 2011. Unemployment remained high, at more than 11%.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-25 average. The private sector accounts for more than 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment worth more than $70 billion. The government's austerity measures, imposed since late 2006, have reduced the budget deficit from over 9% of GDP in 2006 to 3.8% 3.2% in 2010. 2010, with a target of less than 3% in 2011. Hungary's impending inability to service its short-term debt - brought on by the global financial crisis in late 2008 - led Budapest to obtain an IMF-arranged IMF/EU/World Bank-arranged financial assistance package worth over $25 billion. The global economic downturn, declining exports, and low domestic consumption and fixed asset accumulation, dampened by government austerity measures, resulted in an economic contraction of 6.3% in 2009. In 2010 the new government implemented a number of changes including cutting business and personal income taxes, but imposed "crisis taxes" on financial institutions, energy and telecom companies, and retailers. The economy rebounded in 2010 with a big boost from exports, especially to Germany, and growth of more than 2.5% is expected in 2011. Unemployment remained high, at more than 11%. 10% in 2010.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-25 EU-27 average. The private sector accounts for more than 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment worth more than $70 billion. The government's austerity measures, imposed since In late 2006, have reduced the budget deficit from over 9% of GDP in 2006 to 3.2% in 2010, with a target of less than 3% in 2011. 2008, Hungary's impending inability to service its short-term debt - brought on by the global financial crisis in late 2008 - led Budapest to obtain an IMF/EU/World Bank-arranged financial assistance package worth over $25 billion. The global economic downturn, declining exports, and low domestic consumption and fixed asset accumulation, dampened by government austerity measures, resulted in an economic contraction of 6.3% 6.8% in 2009. In 2010 the new government implemented a number of changes including cutting business and personal income taxes, but imposed "crisis taxes" on financial institutions, energy and telecom companies, and retailers. The IMF/EU bail-out program lapsed at the end of the year and was replaced by Post Program Monitoring and Article IV Consultations on overall economic and fiscal processes. The economy rebounded began to recover in 2010 with a big boost from exports, especially to Germany, and achieved growth of more than 2.5% is expected approximately 1.7% in 2011. At the end of 2011 the government turned to the IMF and the EU to obtain financial backstop to support its efforts to refinance foreign currency debt and bond obligations in 2012 and beyond, but Budpest's rejection of EU and IMF economic policy recommendations led to a breakdown in talks with the lenders in late 2012. Since joining the EU in 2004, Hungary has been subject to the European Commisssion's Excessive Deficit Procedure; Brussels has requested that the government outline measures to sustainably reduce the budget deficit to under 3% of GDP. Ongoing economic weakness in Western Europe caused a GDP to fall 1% in 2012. Unemployment remained high, at more than 10% in 2010. 11%.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-27 average. The private sector accounts for more than 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment worth more than $70 billion. In late 2008, Hungary's impending inability to service its short-term debt - brought on by the global financial crisis - led Budapest to obtain an IMF/EU/World Bank-arranged financial assistance package worth over $25 billion. The global economic downturn, declining exports, and low domestic consumption and fixed asset accumulation, dampened by government austerity measures, resulted in an economic contraction of 6.8% in 2009. In 2010 the new government implemented a number of changes including cutting business and personal income taxes, but imposed "crisis taxes" on financial institutions, energy and telecom companies, and retailers. The IMF/EU bail-out program lapsed at the end of the year and was replaced by Post Program Monitoring and Article IV Consultations on overall economic and fiscal processes. The economy began to recover in 2010 with a big boost from exports, especially to Germany, and achieved growth of approximately 1.7% in 2011. At the end of 2011 the government turned to the IMF and the EU to obtain financial backstop to support its efforts to refinance foreign currency debt and bond obligations in 2012 and beyond, but Budpest's Budapest's rejection of EU and IMF economic policy recommendations led to a breakdown in talks with the lenders in late 2012. Since joining the EU in 2004, Hungary has been subject to the European Commisssion's Commission's Excessive Deficit Procedure; Brussels has requested that the government outline measures to sustainably reduce the budget deficit to under 3% of GDP. Ongoing economic weakness in Western Europe as well as lack of domestic investment and demand caused a GDP to fall 1% 1.7% in 2012. Unemployment remained high, at more than 11%.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-27 EU-28 average. The private sector accounts for more than 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment worth more than $70 billion. In late 2008, Hungary's impending inability to service its short-term debt - brought on by the global financial crisis - led Budapest to obtain an IMF/EU/World Bank-arranged financial assistance package worth over $25 billion. The global economic downturn, declining exports, and low domestic consumption and fixed asset accumulation, dampened by government austerity measures, resulted in an a severe economic contraction of 6.8% in 2009. In 2010 the new government implemented a number of changes including cutting business and personal income taxes, but imposed "crisis taxes" on financial institutions, energy and telecom companies, and retailers. The IMF/EU bail-out program lapsed at the end of the year and was replaced by Post Program Monitoring and Article IV Consultations on overall economic and fiscal processes. The economy began to recover in 2010 with a big boost from exports, especially to Germany, and achieved growth of approximately 1.7% in 2011. At the end of 2011 the government turned to the IMF and the EU to obtain financial backstop to support its efforts to refinance foreign currency debt and bond obligations in 2012 and beyond, but Budapest's rejection of EU and IMF economic policy recommendations led to a breakdown in talks with the lenders in late 2012. Since joining the EU in 2004, Hungary has been subject to the European Commission's Excessive Deficit Procedure; Brussels Global demand for high yield has requested that the government outline measures since helped Hungary to sustainably reduce the budget obtain funds on international markets. Hungary’s progress reducing its deficit to under 3% of GDP. Ongoing economic weakness in Western Europe as well as lack of domestic investment and demand caused a GDP led the European Commission in 2013 to fall 1.7% permit Hungary for the first time since joining the EU in 2012. Unemployment remained high, at more than 11%. 2004 to exit the Excessive Deficit Procedure.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-28 average. In late 2008, Hungary's impending inability to service its short-term debt - brought on by the global financial crisis - led Budapest to obtain an IMF/EU/World Bank-arranged financial assistance package worth over $25 billion. The global economic downturn, declining exports, and low domestic consumption and fixed asset accumulation, investment, dampened by government austerity measures, resulted in a severe economic contraction in 2009. In 2010 the new government implemented a number of changes including cutting business and personal income taxes, but imposed "crisis taxes" on financial institutions, energy and telecom companies, and retailers. The IMF/EU bail-out program lapsed at the end of the year 2010 and was replaced by Post Program Monitoring and Article IV Consultations on overall economic and fiscal processes. At the end of 2011 the government turned to the IMF and the EU to obtain financial backstop to support its efforts to refinance foreign currency debt and bond obligations in 2012 and beyond, but Budapest's rejection of EU and IMF economic policy recommendations led to a breakdown in talks with the lenders in late 2012. Global demand for high yield has since helped Hungary to obtain funds on international markets. Hungary’s progress reducing its deficit to under 3% of GDP led the European Commission in 2013 to permit Hungary for the first time since joining the EU in 2004 to exit the Excessive Deficit Procedure.

Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-28 average.
In late 2008, Hungary's impending inability to service its short-term debt - brought on by the global financial crisis - led Budapest to obtain an IMF/EU/World Bank-arranged financial assistance package worth over $25 billion. The global economic downturn, declining exports, and low domestic consumption and investment, dampened by government austerity measures, resulted in a severe economic contraction in 2009. In 2010 2010, the new government implemented a number of changes including cutting business and personal income taxes, but imposed "crisis taxes" on financial institutions, energy and telecom companies, and retailers. The IMF/EU bail-out bailout program lapsed at the end of 2010 and was replaced by Post Program Monitoring and Article IV Consultations on overall economic and fiscal processes. At the end of 2011 the government turned to the IMF and the EU to obtain a financial backstop to support its efforts to refinance foreign currency debt and bond obligations in 2012 and beyond, but Budapest's rejection of EU and IMF economic policy recommendations led to a breakdown in talks with the lenders in late 2012. Global demand for high yield has since helped Hungary to obtain funds on international markets.
Hungary’s progress reducing its deficit to under 3% of GDP led the European Commission in 2013 to permit Hungary for the first time since joining the EU in 2004 to exit the Excessive Deficit Procedure. The government remains committed to keeping the budget deficit in check and lowering public debt by using sectoral taxes, while relying on state interventionist measures to lower utility prices and boost growth and employment.

Hungary has transitioned from a centrally planned to a market-driven economy with a per capita income nearly approximately two-thirds that of the EU-28 average; however, in recent years the government has become more involved in managing the economy. Budapest has implemented unorthodox economic policies to boost household consumption and has relied on EU-funded development projects to generate growth.
The economy is largely driven by exports, making it vulnerable to external market shocks. Following the fall of communism in 1990, Hungary experienced a drop-off in exports and financial assistance from the former Soviet Union. Hungary embarked on a series of economic reforms, including privatization of state-owned enterprises and reduction of social spending programs, to shift from a centrally planned to a market-driven economy, and to reorient its economy towards trade with the West. These efforts helped to spur growth, attract investment, and reduce Hungary’s debt burden and fiscal deficits. However, Despite these reforms, living conditions for the average Hungarian initially deteriorated as inflation increased and unemployment reached double digits. Conditions slowly improved over the 1990s as the reforms came to fruition and export growth accelerated. Economic policies instituted during that decade helped position Hungary to join the European Union in 2004; 2004. Hungary has not yet to join joined the euro-zone, however. euro-zone. Hungary suffered a historic economic contraction as a result of the global economic slowdown in 2008-09 as export demand and domestic consumption dropped, prompting it to take an IMF-EU financial assistance package.
Since 2010, the government has backpedalled backpedaled on many economic reforms and taken a more nationalist and populist approach towards economic management. The government has favored national industries, industries and specifically government-linked businesses, businesses through legislation, regulation, and public procurements. In 2010 and 2012, the government increased taxes on foreign-dominated sectors, such as banking and retail, because the move helped to raise revenues and decrease the budget deficit, thereby allowing Hungary to maintain access to EU development funds. The policy deterred private investment, however. In 2011 and 2014, Hungary nationalized private pension funds. The move funds, which squeezed financial service providers out of the system, but it also helped Hungary curb its public debt and lower its budget deficit to below 3% of GDP, as subsequent pension contributions have been channeled into the state-managed pension fund. Hungary’s public debt (at 73.9% 74.5% of GDP) is still high compared to EU peers in Central Europe. Despite these reversals, real Real GDP growth has remained been robust in the past several few years because due to increased EU cyclical funding increased, funding, higher EU demand for Hungarian exports rose, exports, and a rebound in domestic household consumption rebounded. consumption. To further boost household consumption ahead of an anticipated the 2018 election, the government has announced plans to embarked on a six-year phased increase the to minimum wage wages and public sector salaries, to decrease decreased taxes on foodstuffs and services, to decrease cut the personal income tax from 16% to 15%, as well as to introduce and implemented a uniform 9% business tax for both small and medium medium-sized enterprises and large companies. Real GDP growth slowed in 2016 due to a cyclical fallback decrease in EU funds, funding, but is expected to increase increased to above 3% 3.8% in 2017 and 2018.
as the government pre-financed EU funded projects ahead of the 2018 election. Systemic economic challenges include long-term and youth unemployment, pervasive corruption, labor shortages, shortages driven by demographic declines and migration, widespread poverty in rural areas, vulnerabilities to changes in demand for exports, and a heavy reliance on Russian energy imports.

Hungary has transitioned from a centrally planned to a market-driven economy with a per capita income approximately two-thirds two thirds of the EU-28 average; however, in recent years the government has become more involved in managing the economy. Budapest has implemented unorthodox economic policies to boost household consumption and has relied on EU-funded development projects to generate growth. Following the fall of communism in 1990, Hungary experienced a drop-off in exports and financial assistance from the former Soviet Union. Hungary embarked on a series of economic reforms, including privatization of state-owned enterprises and reduction of social spending programs, to shift from a centrally planned to a market-driven economy, and to reorient its economy towards trade with the West. These efforts helped to spur growth, attract investment, and reduce Hungary’s debt burden and fiscal deficits. Despite these reforms, living conditions for the average Hungarian initially deteriorated as inflation increased and unemployment reached double digits. Conditions slowly improved over the 1990s as the reforms came to fruition and export growth accelerated. Economic policies instituted during that decade helped position Hungary to join the European Union in 2004. Hungary has not yet joined the euro-zone. Hungary suffered a historic economic contraction as a result of the global economic slowdown in 2008-09 as export demand and domestic consumption dropped, prompting it to take an IMF-EU financial assistance package. Since 2010, the government has backpedaled on many economic reforms and taken a more populist approach towards economic management. The government has favored national industries and government-linked businesses through legislation, regulation, and public procurements. In 2011 and 2014, Hungary nationalized private pension funds, which squeezed financial service providers out of the system, but also helped Hungary curb its public debt and lower its budget deficit to below 3% of GDP, as subsequent pension contributions have been channeled into the state-managed pension fund. Hungary’s public debt (at 74.5% of GDP) is still high compared to EU peers in Central Europe. Real GDP growth has been robust in the past few years due to increased EU funding, higher EU demand for Hungarian exports, and a rebound in domestic household consumption. To further boost household consumption ahead of the 2018 election, the government embarked on a six-year phased increase to minimum wages and public sector salaries, decreased taxes on foodstuffs and services, cut the personal income tax from 16% to 15%, and implemented a uniform 9% business tax for small and medium-sized enterprises and large companies. Real GDP growth slowed in 2016 due to a cyclical decrease in EU funding, but increased to 3.8% in 2017 as the government pre-financed EU funded projects ahead of the 2018 election. Systemic economic challenges include pervasive corruption, labor shortages driven by demographic declines and migration, widespread poverty in rural areas, vulnerabilities to changes in demand for exports, and a heavy reliance on Russian energy imports.

Hungary has transitioned from a centrally planned to a market-driven economy with a per capita income approximately two thirds of the EU-28 average; however, in recent years the government has become more involved in managing the economy. Budapest has implemented unorthodox economic policies to boost household consumption and has relied on EU-funded development projects to generate growth.
Following the fall of communism in 1990, Hungary experienced a drop-off in exports and financial assistance from the former Soviet Union. Hungary embarked on a series of economic reforms, including privatization of state-owned enterprises and reduction of social spending programs, to shift from a centrally planned to a market-driven economy, and to reorient its economy towards trade with the West. These efforts helped to spur growth, attract investment, and reduce Hungary’s debt burden and fiscal deficits. Despite these reforms, living conditions for the average Hungarian initially deteriorated as inflation increased and unemployment reached double digits. Conditions slowly improved over the 1990s as the reforms came to fruition and export growth accelerated. Economic policies instituted during that decade helped position Hungary to join the European Union in 2004. Hungary has not yet joined the euro-zone. Hungary suffered a historic economic contraction as a result of the global economic slowdown in 2008-09 as export demand and domestic consumption dropped, prompting it to take an IMF-EU financial assistance package.
Since 2010, the government has backpedaled on many economic reforms and taken a more populist approach towards economic management. The government has favored national industries and government-linked businesses through legislation, regulation, and public procurements. In 2011 and 2014, Hungary nationalized private pension funds, which squeezed financial service providers out of the system, but also helped Hungary curb its public debt and lower its budget deficit to below 3% of GDP, as subsequent pension contributions have been channeled into the state-managed pension fund. Hungary’s public debt (at 74.5% of GDP) is still high compared to EU peers in Central Europe. Real GDP growth has been robust in the past few years due to increased EU funding, higher EU demand for Hungarian exports, and a rebound in domestic household consumption. To further boost household consumption ahead of the 2018 election, the government embarked on a six-year phased increase to minimum wages and public sector salaries, decreased taxes on foodstuffs and services, cut the personal income tax from 16% to 15%, and implemented a uniform 9% business tax for small and medium-sized enterprises and large companies. Real GDP growth slowed in 2016 due to a cyclical decrease in EU funding, but increased to 3.8% in 2017 as the government pre-financed EU funded projects ahead of the 2018 election.
Systemic economic challenges include pervasive corruption, labor shortages driven by demographic declines and migration, widespread poverty in rural areas, vulnerabilities to changes in demand for exports, and a heavy reliance on Russian energy imports.