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Welcome to Johnbirchall-economist.com!
(
Europe)


An overview of Hungary:

An overview

Annual data 

 2002(a) 

 Historical averages (%) 

 1998-2002 

 Population (m) 

 10.1 

 Population growth 

 -0.3 

 GDP (US$ bn; market exchange rate) 

 65.8 

 Real GDP growth 

 4.3 

 GDP (US$ bn; PPP) 

 136.0 

 Real domestic demand growth 

 5.0 

 GDP per head (US$; market exchange rate) 

 6,530 

 Inflation 

 9.7 

 GDP per head (US$; purchasing power parity) 

 13,486 

 Current-account balance/GDP 

 -4.7 

 Exchange rate (av) Ft:US$ 

 257.9 

 FDI inflows/GDP 

 3.7 

Background

Hungary was proclaimed a “workers’ and peasants’ state” in 1949. A rebellion in 1956 against communist rule was crushed by the Soviet Union. In the 1960s Hungary embarked on a series of economic reforms towards a market-based system, but there was little political liberalisation and reforms flagged. Janos Kadar’s government fell in May 1988 and free elections were finally held in March and April 1990. Reform-minded centre-right and centre-left coalitions have alternated in power since then, transforming Hungary into a fully functioning market economy.

Political structure

Hungary is a multiparty democracy. The unicameral parliament has 386 members: 176 from single-member constituencies, 140 from regional lists and 70 from a national list. The president, who is elected by parliament, has little power.

Policy issues

Hungary’s centre-left government continues to pursue the structural reforms required by EU membership, set for May 2004. It is also committed to the promotion of growth. However, it is constrained by a large fiscal deficit, which must be reined in if Hungary is to join the EU’s economic and monetary union (EMU) before the end of the decade. Since June, the National Bank of Hungary (NBH, the central bank) has raised interest rates by 6 percentage points in defence of the forint and long-term inflation targets related to EMU.


Taxation

The corporate tax rate on reinvested profit is set to fall to 16% in 2004 after nine years of being levied at 18%. Automatic tax incentives for foreign-owned and joint-venture companies have been eliminated. A two-tier value-added tax (VAT) system has been in place since January 1st 1993. The current basic VAT rate is 25%, with a preferential rate of 12% for food, energy and some other items (this rate is set to rise to 15%). The rate for the employers’ social security contribution was reduced from 33% to 31% in 2001, and to 29% in January 2002.

Foreign trade

After the fall of communism, there was a reorientation of trade to the West, with around three-quarters of Hungary’s exports now directed to the EU. Hungary ran large current-account deficits in the mid-1990s, but external balances improved along with export competitiveness. In 1998-2001 the current-account deficit showed steady improvement, but this changed in 2002-03, as wage increases outpaced productivity growth, and demand in the EU stagnated.

 Major exports 2002 

 % of total 

 Major imports 2002 

 % of total 

 Machinery & equipment 

 58.7 

 Machinery & equipment 

 52.0 

 Other manufactures 

 30.9 

 Other manufactures 

 35.5 

 Food, beverages & tobacco 

 6.8 

 Fuels & electricity 

 7.5 

 Raw materials 

 2.0 

 Food, beverages & tobacco 

 3.0 

 Fuels & electricity 

 1.6 

 Raw materials 

 2.0 

   

   

   

   

 Leading markets 2002 

 % of total 

 Leading suppliers 2002 

 % of total 

 Germany 

 33.7 

 Germany 

 23.9 

 Austria 

 8.2 

 Austria 

 7.7 

 Italy 

 5.4 

 Italy 

 7.5 

 France 

 5.2 

 Russia 

 6.0 

 

GDP per head ($ at PPP)

8,230

8,890

9,470

9,930

GDP (% real change pa)

4.17

5.15

3.80

3.30

Government consumption (% of GDP)

10.15

9.84

11.00

11.05

Budget balance (% of GDP)

-3.20

-3.48

-5.15

-9.65

Consumer prices (% change pa; av)

9.99

9.82

9.16

5.29

Public debt (% of GDP)

61.21

55.53

54.04

60.45

Labour costs per hour (USD)

1.81

1.73

1.95

2.48

Recorded unemployment (%)

6.95

6.38

5.71

5.82

Current-account balance/GDP

-5.11

-6.25

-3.39

-4.27

Foreign-exchange reserves (m$)

10,954

11,190

10,727

10,349

 

 

Useful Web sites

http://europa.eu.int/comm/enlargement/hungary/

 The EU Enlargement site

http://www.budapestsun.com/

An English language newspaper published in Budapest

http://www.ssees.ac.uk/hungary.htm

University of London site relating to Hungary


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