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(Europe)
An overview of Hungary:
An
overview
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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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