Hungary

ECONOMICS

Main Crops: Wheat, corn, sunflower seed, potatoes, sugar beets; pigs, cattle, poultry, dairy products
Natural Resources:
Bauxite, coal, natural gas, fertile soils
Major Industries:
Mining, metallurgy, construction materials, processed foods, textiles, chemicals (especially pharmaceuticals), motor vehicles

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.

1990 2000 2010 2020
GNI, Atlas method (current US$) (billions) 37.9 47.14 132.66 154.93
GNI per capita, Atlas method (current US$) 3,660 4,620 13,270 15,890
GNI, PPP (current international $) (billions) 85.04 114 207.29 313.83
GNI per capita, PPP (current international $) 8,210 11,160 20,730 32,190
GDP (current US$) (billions) 34.75 47.22 132.23 155.81
GDP growth (annual %) -3.1 4.5 1.1 -4.7
Inflation, GDP deflator (annual %) 21.5 9.6 2.5 5.9
Agriculture, forestry, and fishing, value added (% of GDP) .. 5 3 3
Industry (including construction), value added (% of GDP) .. 27 25 25
Exports of goods and services (% of GDP) 29 67 81 79
Imports of goods and services (% of GDP) 30 71 76 78
Gross capital formation (% of GDP) 21 28 21 27
Revenue, excluding grants (% of GDP) 47.1 38 38 37.6
Net lending (+) / net borrowing (-) (% of GDP) -4.5 -2.8 -3.6 -2
States and markets
Time required to start a business (days) .. 54 5 7
Domestic credit provided by financial sector (% of GDP) .. .. .. ..
Tax revenue (% of GDP) 25.5 22.4 22.6 22.5
Military expenditure (% of GDP) 2.6 1.5 1 1.6
Mobile cellular subscriptions (per 100 people) 0 30.1 121 107
Individuals using the Internet (% of population) 0 7 65 84.8
High-technology exports (% of manufactured exports) .. .. 26 17
Statistical Capacity Score (Overall Average) (scale 0 - 100) .. .. 87 ..
Global links
Merchandise trade (% of GDP) 62 128 139 151
Net barter terms of trade index (2000 = 100) .. 100 97 107
External debt stocks, total (DOD, current US$) (millions) .. .. .. ..
Total debt service (% of exports of goods, services and primary income) .. .. .. ..
Net migration (thousands) 100 62 30 30
Personal remittances, received (current US$) (millions) .. 363 1,850 3,820
Foreign direct investment, net inflows (BoP, current US$) (millions) 554 2,748 -20,770 168,928
Net official development assistance received (current US$) (millions) .. .. .. ..