Economy of Hungary
Encyclopedia
The economy of Hungary
is a medium-sized, structurally, politically and institutionally open economy in Central Europe
and is part of the European Union's (EU) single market
. Like most Eastern European economies, the economy of Hungary experienced market liberalisation in the early 1990s as part of the transition from socialist economy to market economy
.
Hungary is a member of the Organisation for Economic Co-operation and Development (OECD) since 1995, a member of the World Trade Organization (WTO) since 1996, and a member of the European Union since 2004.
Declining exports, reduced domestic consumption and fixed asset accumulation hit Hungary
hard during the Financial Crisis of 2008, making the country enter a severe recession of -6.4%, one of the worst economic contractions in its history. However, the country has recovered quite well from the recession, though high unemployment, sluggish growth and the external debt burden are continuing problems. A recent estimate done by the CIA has shown that Industrial Production Growth Rate is growing by 11%, among one of the highest in the world, and a signal that the economy is recovering.
The center-right Hungarian Democratic Forum government of 1990-1994 decided to demolish agricultural co-operatives by splitting them up and giving machinery and land to the former members. The government also introduced a "Law of Recompensation" which offered vouchers to people who used to own land before nationalization of land in 1948. These people (or their inheritors) could exchange their vouchers to lands of the agricultural cooperatives, who were forced to give up some of their land for this purpose.
Small stores and retail businesses were privatized between 1990 and 1994, however, the greenfield investments of foreign companies like Tesco
, Cora
, and Ikea
had a lot bigger economic impact. Many public utilities, including the national telecommunications company (Matáv
) and the national oil and gas conglomerate (MOL Group), and the electricity supply and production companies were privatized as well.
Though most banks were sold to foreign investors, the largest bank, National Savings Bank (OTP)
was kept as a mostly Hungarian-owned bank. 20%-20% of the shares were sold to foreign institutional investors and given to the Social Security organizations, 5% were bought by employees, and 8% was offered at the Budapest Stock Exchange
.
After not having a minister of finance for more than a month, prime minister Gyula Horn
appointed Lajos Bokros
as Finance Minister on March 1, 1995. He introduced a string of austerity measures (the "Bokros Package") on March 12, 1995 which had the following key points: one-time 9% devaluation of the forint, introducing a constant sliding devaluation, 8% additional customs duty on all goods except for energy sources, limitation of growth of wages in the public sector, simplified and accelerated privatization. The package also included welfare cutbacks, including abolition of free higher education and dental service; reduced family allowances, child-care benefits, and maternity payments depending on income and wealth; lowering subsidies of pharmaceuticals, and raising retirement age.
These reforms not only increased investor confidence, but they were also supported by the IMF and the World Bank, however, they were not welcome widely by the Hungarians; Bokros broke the negative record of popularity: 9% of the population wanted to see him in an "important political position" and only 4% were convinced that the reforms would "improve the country's finances in a big way"
In 1996, the Ministry of Finance introduced a new pension system instead of the fully state-backed one: private pension savings accounts were introduced, which were 50% social security based and 50% funded.
In 2006 Prime Minister Ferenc Gyurcsány
was reelected on a platform promising economic “reform without austerity.”
However, after the elections in April 2006, the Socialist coalition under Prime Minister Ferenc Gyurcsany unveiled a package of austerity measures which were designed to reduce the budget deficit to 3% of GDP by 2008.
Because of the austerity program, the economy of Hungary slowed down in 2007. However, due to many large investments, GDP growth may improve to 2.8-4.0 percent in the second half of 2008. In foreign investments, Hungary has seen a shift from lower-value textile and food industry to investment in luxury vehicle production, renewable energy systems, high-end tourism, and information technology. As well as farming in the southern region of Hungary.
Because of the uncertainty of the crisis, banks gave less loans which led to a decrease in investment. This along with price-awareness and fear of bankruptcy led to a fallback in consumption which then increased job losses and decreased consumption even further. Inflation did not rise significantly, but real wages decreased.
The fact that the euro and the Swiss franc is worth a lot more in forints than they did before affected a lot of people. According to The Daily Telegraph, "statistics show that more than 60 percent of Hungarian mortgages and car loans are denominated in foreign currencies".
Though the forint has got stronger, some economists believe that "The Hungarian forint is too strong in the current economic environment".
Hungary's total land area is 93,030 km2 along with 690 km2 of water surface area which altogether makes up 1% of Europe's area.
Nearly 75% of Hungary's landscape consists of flat plains. Additional 20% of the country's area consists of foothills whose altitude is 400 m at the most; higher hills and water surface makes up the remaining 5%.
The two flat plains that take up three quarters of Hungary's area are the Great Hungarian Plain
and the Little Hungarian Plain
. Hungary's most significant natural resource is arable land. About 83% of the country's total territory is suitable for cultivation; of this portion, 75% (around 50% of the country's area) is covered by arable land, which is an outstanding ratio compared to other EU countries. Hungary lacks extensive domestic sources of energy and raw materials needed for further industrial development.
19% of the country is covered by forests. These are located mainly in the foothills such as the North Hungarian and the Transdanubian Mountains, and the Alpokalja
. The composition of forests is various; mostly oak or beech, but the rest include fir, willow, acacia and plane.
In European terms, Hungary's underground water reserve is one of the largest. Hence the country is rich in brooks and hot springs as well as medicinal springs and spas; as of 2003, there are 1250 springs that provide water warmer than 30 degrees. 90% of Hungary's drinking water is mostly retrieved from such sources.
The major rivers of Hungary are the Danube
and the Tisza
. The Danube also flows through parts of Germany
, Austria
, Slovakia
, Serbia
, and Romania
. It is navigable within Hungary for 418 km. The Tisza River is navigable for 444 km in the country. Hungary has three major lakes. Lake Balaton
, the largest, is 78 km long and from 3 to 14 km wide, with an area of 592 km2. Lake Balaton is Central Europe's largest lake and a prosperous tourist spot and recreation area. Its shallow waters offer summer bathing and during the winter its frozen surface provides facilities for winter sports. Smaller bodies of water include Lake Velence
(26 km2) in Fejér County and Lake Fertő (82 km2 within Hungary).
n, Slovenia
n, Croatia
n and Serbia
n borders via motorways.
Due to its location and geographical features, several transport corridors cross Hungary. Pan-European corridors
no. IV, V, and X, and European routes no. E60
, E71
, E73, E75
, and E77
go through Hungary. Thanks to its radial road system, all of these routes touch Budapest
.
There are five international, four domestic, four military and several non-public airports in Hungary. The largest airport is the Budapest Ferihegy International Airport
(BUD) located at the southeastern border of Budapest. In 2008, the airport had 3,866,452 arriving and 3,970,951 departing passengers.
In 2006 the Hungarian railroad system was 7685 km long, 2791 km of it electrified.
Piped gas
is available in 2873 settlements, 91.1% of all of them. To avoid gas shortages due to Ukrainian
pipeline shutdowns like the one in January 2009, Hungary participates both in the Nabucco
and the South Stream
gas pipeline projects. Hungary also has strategical gas reserves: the latest reserve of 1.2 billion cubic meters was opened in October 2009.
In 2008, 94.9% of households had running water. Though it is the responsibility of municipal governments to provide people with healthy water supply, the Hungarian government and the European Union offer subsidies to those who wish to develop water supplies
or sewage systems
. Partly because of these subsidies, 71.3% of all dwellings are connected to the sewage system, up from 50,1% in 2000.
Internet penetration has been rising significantly over the past few years: the ratio of households having an internet connection has risen from 22.1% (49% of which was broadband) in 2005 to 48.4% (87.3% of which was broadband) in 2008.
The Ministry of Economy and Transport introduced the eHungary program in 2004 aiming to provide every person in Hungary with internet access by setting up "eHungary points" in public spaces like libraries, schools and cultural centers. The program also includes "the introduction of the eCounsellor network – a service through which professionals provide assistance for citizens in the effective usage of electronic information, services and knowledge".
and the plains
that make up about half of Hungary’s landscape. The most important crops are wheat, corn, sunflower, potato, sugar beet, canola and a wide variety of fruits (notably apple, peach, pear, grape, watermelon, plum etc.). Hungary has several wine regions producing among others the worldwide famous white dessert wine Tokaji
and the red Bull’s Blood. Another traditional world-famous alcoholic drink is the fruit brandy pálinka
.
Mainly cattle, pigs, poultry and sheep are raised in the country. The livestock includes the Hungarian Grey Cattle
which is a major tourist attraction in the Hungarian National Park of Hortobágy
. An important component of the country’s gastronomic heritage is foie gras
with about 33000 farmers engaged in the industry. Hungary is the second largest world producer and the biggest exporter of foie gras (exporting mainly to France
).
Another symbol of Hungarian agriculture and cuisine is the paprika
(both sweet and hot types). The country is one of the leading paprika producers of the world with Szeged
and Kalocsa
being the centres of production.
and textile industry seemed to be losing importance in the past two decades. In spite of the significant drop in the last decade, food industry is still giving up to 14% of total industrial production and amounts to 7-8% of the country's exports.
Nearly 50% of energy consumption is dependent on imported energy sources. Gas and oil are transported through pipelines from Russia forming 72% of the energy structure, while nuclear power produced by the nuclear power station of Paks
accounts for 12%.
(Szentgotthárd
), Magyar Suzuki
(Esztergom
) and the largest Audi
factory (Győr
) in Central Europe.
17% of the total Hungarian exports comes from the exports of Audi, Opel and Suzuki. The sector employs about 90.000 people in more than 350 car component manufacturing companies.
Audi has built the largest engine manufacturing plant of Europe (third largest in the world) in Győr
becoming Hungary's largest exporter with total investments reaching over € 3,300 million until 2007. Audi's workforce assembles the Audi TT
, the Audi TT Roadster and the A3 Cabriolet
in Hungary. The plant delivers engines to carmakers Volkswagen, Skoda, Seat and also to Lamborghini.
Daimler-Benz
invests € 800 million ($1.2 billion) and creates up to 2,500 jobs at a new assembly plant in Kecskemét
, Hungary with capacity for producing 100,000 Mercedes-Benz
compact cars a year.
Opel
produced 80,000 Astra and 4,000 Vectra cars from March 1992 until 1998 in Szentgotthárd
, Hungary. Today, the plant produces about half million engines and cylinder heads a year.
The total value of imports was 68,62 billion euros, the value of exports was 68,18 billion euros in 2007. The external trade deficit decreased by 12,5% since the previous year, easing down from 2,4 billion to 308 million euros in 2007. In the same year, 79% of Hungary’s export and 70% of the imports were transacted inside the EU.
Tourism employs nearly 150 thousand people and the total income from tourism was 4 billion euros in 2008. One of Hungary’s top tourist destinations is Lake Balaton
, the largest freshwater lake in Central Europe, with a number of 1,2 million visitors in 2008. The most visited region is Budapest
, the Hungarian capital attracted 3,61 million visitors in 2008.
Hungary was the world’s 26th most visited country in 2007. The Hungarian spa culture is world-famous, with thermal baths of all sorts and over 50 spa hotels located in many towns, each of which offer the opportunity of a pleasant, relaxing holiday and a wide range of quality medical and beauty treatments.
The currency of Hungary is the Hungarian forint (HUF, Ft) since 1 August 1946. A forint consists of 100 fillérs, however, these have not been in circulation since 1999, they are only used in accounting.
There are six coins
(5, 10, 20, 50, 100, 200) and six banknotes
(500, 1000, 2000, 5000, 10000 and 20000). The 1 and 2 forint coins were withdrawn in 2008, yet prices remained the same as stores follow the official rounding scheme for the final price. The 200 forint note was withdrawn on 16 November 2009.
As a member of the European Union
, the long term aim of the Hungarian government is to replace the forint with the euro
. See also: Fiscal policy.
You can check current exchange rates with graphs of past rates at Google Finance.
1 Current EU member states that have not yet adopted the Euro, candidates and official potential candidates.
² No more than 1.5% higher than the 3 best-performing EU member states.
³ No more than 2% higher than the 3 best-performing EU
member states.
4 Formal obligation for Euro adoption in the country EU Treaty of Accession
or the Framework for membership negotiations.
5 Values from May 2008 report. To be updated each year.
is free and compulsory from the age of 5 to 18. The state provides free pre-primary schooling for all children, 8 years of general education and 4 years of upper secondary level general or vocational education. Higher education system follows the three-cycle structure and the credit system of the bologna process
. Governments aim to reach European standards and encourage international mobility by putting emphasis on digital literacy, and enhancing foreign language studies: all secondary level schools teach foreign languages and at least one language certificate is needed for the acquisition of a diploma. Over the past decade, this resulted in a drastic increase in the number of people speaking at least one foreign language.
Hungary's most prestigious universities are:
Financial sources for education are mainly provided by the state (making up 5.1-5.3% of the annual GDP). In order to improve the quality of higher education, the government encourages contributions by students and companies. Another important contributor is the EU.
The system has weaknesses, the most important being segregation and unequal access to quality education. The 2006 PISA report concluded that while students from comprehensive schools did better than the OECD average, pupils from vocational secondary schools did much worse. Another problem is of the higher education’s: response to regional and labour market needs is insufficient. Government plans include improving the career guidance system and establishing a national digital network that will enable the tracking of jobs and facilitate the integration into the labour market.
Hungary’s Gini coefficient
of 0.269 ranks 11th in the world. The graph on the right shows that Hungary is close in equality to the world-leader Denmark
. The highest 10% of the population gets 22.2% of the incomes. According to the business magazine Napi Gazdaság, the owner of the biggest fortune, 300 billion HUF, is Sándor Demján. On the other hand, the lowest 10% gets 4% of the incomes. Considering the standard EU indicators (Percentage of the population living under 60% of the per capita median income), 13% of the Hungarian population is stricken by poverty. According to the Human Development Report
, the country’s HPI-1
value is 2.2% (3rd among 135 countries), and its HDI
value is 0.879 (43rd out of 182).
The fertility rate in Hungary, just like in many European countries, is very low: 1.34 children/women (205th in the world) Life expectancy at birth is 73.3 years., while the expected number of healthy years is 57.6 for females and 53.5 for males. The average life expectancy overall is 73.1 years.
Hungary’s GDI (gender-related development index)
value of 0.879 is 100% of its HDI value (3rd best in the world). 55.5% of the female population (between 15 and 64) participate in the labour force, and the ratio of girls to boys in primary and secondary education is 99%.
Racial inequality, which strikes primarily Roma in Hungary, is a serious problem. Although the definition of the Roma identity is controversial, qualitative studies prove that the Roma employment rate decreased significantly following the fall of Communism: due to the tremendous layoffs of unskilled workers during the transition years, more than one-third of Roma were excluded from the labour market. Therefore, this ethnic conflict is inherently interconnected with the income inequalities in the country – at least two-thirds of the poorest 300,000 people in Hungary are Romas. Furthermore, ethnic discrimination is outstandingly high, 32% of Romas experience discrimination when looking for work. Consequently, new Roma entrants to the labour market are rarely able to find employment, which creates a motivation deficit and further reinforces segregation
and unemployment.
remains to be a severe issue in Hungary. According to Transparency International
Hungary, almost one-third of top managers claim they regularly bribe politicians. Most people (42%) in Hungary think that the sector most affected by bribery is the political party system. Bribery is common in the healthcare system
in the form of gratitude payment–92% of all people think that some payment should be made to the head surgeon conducting a heart operation or an obestetrician for a child birth.
Another problem is the administrative burden: in terms of the ease of doing business, Hungary ranks 47th out of 183 countries in the world. The five days’ time required to start a new business ranks 29th, and the country is 122nd concerning the ease of paying taxes.
In accordance with the theory of the separation of powers
, the judicial system is independent from the legislative and the executive branches. Consequently, courts and prosecutions are not influenced by the government. However, the legal system is slow and overburdened, which makes proceedings and rulings lengthy and inefficient. Such a justice system is hardly capable of prosecuting corruption and protecting the country’s financial interests.
(Hungarian: Magyar Nemzeti Bank, MNB) which is the central bank in Hungary. According to the Hungarian Law of National Bank (which became operative in 2001. – LVIII. Law about The Hungarian National Bank), the primary objective of MNB is to achieve and maintain price stability. This aim is in line with the European and international practice.
Price stability means achieving and maintaining a basically low, but positive inflation rate. This level is around 2-2.5% according to international observations, while the European Central Bank
"aims at inflation rates of below, but close to 2% over the medium term". Since Hungary is in the process of catching up (Balassa-Samuelson effect
), the long-term objective is a slightly higher figure, around 2.3-3.2%. Therefore the medium term inflation target of the Hungarian National Bank is 3%.
Concerning the exchange rate system, the floating exchange rate
system is in use since 26 February 2008, as a result of which HUF is fluctuating in accordance with the effects of the market in the face of the reference currency, the euro.
The chart on the right shows forint exchange rates for the British pound
(GBP), euro
(EUR), Swiss franc
(CHF), and the U.S. dollar
(USD) from June 2008 to September 2009. It indicates that a relatively strong forint weakened since the beginning of the financial crisis, and that its value has recently taken an upward turn.
Compared to the euro the forint was at peak on June 18, 2008 when 1000 Ft was 4.36€ and 1€ was 229.11Ft. The forint was worth the least on March 6, 2009; this day 1000 Ft was 3.16€ and 1€ was 316Ft).
Compared to USD, most expensive/cheapest dates are June 22, 2008 and March 6, 2009 with 1000HUF/USD rates 6.94 and 4.01 respectively.
Along with joining the EU the country undertook the task of joining the Eurozone
as well. Therefore, the Maastricht criteria which forms the conditionalities of joining the Eurozone acts as an authoritative guideline to Hungarian fiscal politics. Although there has been remarkable progress, recent years’ statistics still point at significant discrepancies between the criteria and fiscal indices. The target date for adapting the Euro has not been fixed, either.
General government deficit has shown a drastic decline to -3.4% (2008) from -9.2% (2006). According to an MNB forecast however, until 2011, the deficit will by a small margin fall short of the 3.0% criterion.
Another criterion that is found lacking is the ratio of gross government debt to GDP which, since 2005, exceeds the allowed 60%. According to an ESA95
figure, in 2008 the ratio increased from 65.67% to 72.61%, which primarily results from the requisition of an IMF-arranged financial assistance package.
Hungary’s balance of payments on its current account has been negative since 1995, around 6-8% in the 2000s reaching a negative peak 8.5% in 2008. Still, current account deficit will expectedly decrease in the following period, as imports will diminish compared to exports as an effect of the financial crisis.
, a corporate income tax
and a value added tax
. Among the total tax income the ratio of local taxes is solely 5% while the EU average is 30%.
The central tax system consists of three components:
Personal income tax
The taxation of an individual is progressive, determining the tax rate based on the individual’s income: with earning up to 1,900,000 forints a year, the tax is 18%, the tax on incomes above this limit is 36% since 1 of July, 2009.
According to the income-tax returns of 2008, 14,6% of taxpayers was charged for 64,5% of the total tax burdens.
Corporate income tax
Corporate tax is fixed at 16% of the positive rateable value, with an additional tax called solidarity tax of 4%, the measure of which is calculated based on the result before tax of the company (the solidarity tax has been in use since September, 2006). The actual rateable value might be different is the two cases.
Value added tax (VAT)
The rate of value added tax in Hungary is 25% since 1 of July, 2009. At the same time, reduced rates of 18% came into practice, concerning basic food (milk, flavoured milk, dairy products, corn, flour) and distance heating, medicines have a rate of 5%.
Broadband penetration rate
Individuals using computer and internet
. The EU's free trade system helps Hungary, as it is a relatively small country and thus needs export and import.
After the accession to the EU, Hungarian workers could immediately go to work to Ireland, Sweden and the United Kingdom. Other countries imposed restrictions.
Hungary
Hungary , officially the Republic of Hungary , is a landlocked country in Central Europe. It is situated in the Carpathian Basin and is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. The...
is a medium-sized, structurally, politically and institutionally open economy in Central Europe
Central Europe
Central Europe or alternatively Middle Europe is a region of the European continent lying between the variously defined areas of Eastern and Western Europe...
and is part of the European Union's (EU) single market
Single market
A single market is a type of trade bloc which is composed of a free trade area with common policies on product regulation, and freedom of movement of the factors of production and of enterprise and services. The goal is that the movement of capital, labour, goods, and services between the members...
. Like most Eastern European economies, the economy of Hungary experienced market liberalisation in the early 1990s as part of the transition from socialist economy to market economy
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
.
Hungary is a member of the Organisation for Economic Co-operation and Development (OECD) since 1995, a member of the World Trade Organization (WTO) since 1996, and a member of the European Union since 2004.
Declining exports, reduced domestic consumption and fixed asset accumulation hit Hungary
Hungary
Hungary , officially the Republic of Hungary , is a landlocked country in Central Europe. It is situated in the Carpathian Basin and is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. The...
hard during the Financial Crisis of 2008, making the country enter a severe recession of -6.4%, one of the worst economic contractions in its history. However, the country has recovered quite well from the recession, though high unemployment, sluggish growth and the external debt burden are continuing problems. A recent estimate done by the CIA has shown that Industrial Production Growth Rate is growing by 11%, among one of the highest in the world, and a signal that the economy is recovering.
Privatization in Hungary
In January 1990, the State Privatization Agency (SPA, Állami Vagyonügynökség) was established to manage the first steps of privatization. Because of Hungary's USD 21.2bn foreign debt, the government decided to sell state property instead of distributing it for free among the people. The SPA was attacked by populist groups because several companies' management had the right to find buyers and discuss sale terms with them thus "stealing" the company. Another reason for discontent was that the state offered large tax subsidies and environmental investments, which sometimes cost more than the selling price of the company. Along with the acquisition of companies, foreign investors launched many "greenfield investments".The center-right Hungarian Democratic Forum government of 1990-1994 decided to demolish agricultural co-operatives by splitting them up and giving machinery and land to the former members. The government also introduced a "Law of Recompensation" which offered vouchers to people who used to own land before nationalization of land in 1948. These people (or their inheritors) could exchange their vouchers to lands of the agricultural cooperatives, who were forced to give up some of their land for this purpose.
Small stores and retail businesses were privatized between 1990 and 1994, however, the greenfield investments of foreign companies like Tesco
Tesco
Tesco plc is a global grocery and general merchandise retailer headquartered in Cheshunt, United Kingdom. It is the third-largest retailer in the world measured by revenues and the second-largest measured by profits...
, Cora
Cora
Cora may refer to:* Cora people, an indigenous ethnic group of Western Central Mexico** Cora languagePeople:* Cat Cora, an Iron Chef on Food Network's Iron Chef America* Tom Cora, American cellist...
, and Ikea
IKEA
IKEA is a privately held, international home products company that designs and sells ready-to-assemble furniture such as beds and desks, appliances and home accessories. The company is the world's largest furniture retailer...
had a lot bigger economic impact. Many public utilities, including the national telecommunications company (Matáv
Magyar Telekom
Magyar Telekom Nyrt. is Hungary's largest telecommunications company. The former monopolist is now a fully consolidated subsidiary of Deutsche Telekom....
) and the national oil and gas conglomerate (MOL Group), and the electricity supply and production companies were privatized as well.
Though most banks were sold to foreign investors, the largest bank, National Savings Bank (OTP)
OTP Bank
OTP Bank is the biggest commercial bank in Hungary, operating in Central and Eastern Europe. The bank provides universal financial services for more than 13 million costumers, through nearly 1500 branches in 9 countries....
was kept as a mostly Hungarian-owned bank. 20%-20% of the shares were sold to foreign institutional investors and given to the Social Security organizations, 5% were bought by employees, and 8% was offered at the Budapest Stock Exchange
Budapest Stock Exchange
The Budapest Stock Exchange was re-opened in 1990 with headquarters in Budapest, Hungary.BSE is the key institution of the Hungarian Financial market and the official trading venue for publicly offered securities....
.
Hungary's economy since 1990
Reaching 1995, Hungary's fiscal indices deteriorated: foreign investment fell as well as judgement of foreign analysts on economic outlook. Due to high demand in import goods, Hungary also had a high trade deficit and budget gap, and it could not reach an agreement with the IMF, either.After not having a minister of finance for more than a month, prime minister Gyula Horn
Gyula Horn
Gyula Horn is a Hungarian politician and the third Prime Minister of the Republic of Hungary, from 1994–1998....
appointed Lajos Bokros
Lajos Bokros
Lajos András Bokros is a Hungarian economist and Member of the European Parliament for Hungary.Bokros was born in Budapest. He graduated from and holds a Ph.D. from the Budapest University of Economics....
as Finance Minister on March 1, 1995. He introduced a string of austerity measures (the "Bokros Package") on March 12, 1995 which had the following key points: one-time 9% devaluation of the forint, introducing a constant sliding devaluation, 8% additional customs duty on all goods except for energy sources, limitation of growth of wages in the public sector, simplified and accelerated privatization. The package also included welfare cutbacks, including abolition of free higher education and dental service; reduced family allowances, child-care benefits, and maternity payments depending on income and wealth; lowering subsidies of pharmaceuticals, and raising retirement age.
These reforms not only increased investor confidence, but they were also supported by the IMF and the World Bank, however, they were not welcome widely by the Hungarians; Bokros broke the negative record of popularity: 9% of the population wanted to see him in an "important political position" and only 4% were convinced that the reforms would "improve the country's finances in a big way"
In 1996, the Ministry of Finance introduced a new pension system instead of the fully state-backed one: private pension savings accounts were introduced, which were 50% social security based and 50% funded.
In 2006 Prime Minister Ferenc Gyurcsány
Ferenc Gyurcsány
Ferenc Gyurcsány is a Hungarian politician. He was the sixth Prime Minister of Hungary from 2004 to 2009.He was nominated to take that position on 25 August 2004 by the Hungarian Socialist Party , after Péter Medgyessy resigned due to a conflict with the Socialist Party's coalition partner...
was reelected on a platform promising economic “reform without austerity.”
However, after the elections in April 2006, the Socialist coalition under Prime Minister Ferenc Gyurcsany unveiled a package of austerity measures which were designed to reduce the budget deficit to 3% of GDP by 2008.
Because of the austerity program, the economy of Hungary slowed down in 2007. However, due to many large investments, GDP growth may improve to 2.8-4.0 percent in the second half of 2008. In foreign investments, Hungary has seen a shift from lower-value textile and food industry to investment in luxury vehicle production, renewable energy systems, high-end tourism, and information technology. As well as farming in the southern region of Hungary.
2008-2009 financial crisis
On 27 October 2008, Hungary reached an agreement with the IMF and EU for a rescue package of US$25 billion, aiming to restore financial stability and investors' confidence.Because of the uncertainty of the crisis, banks gave less loans which led to a decrease in investment. This along with price-awareness and fear of bankruptcy led to a fallback in consumption which then increased job losses and decreased consumption even further. Inflation did not rise significantly, but real wages decreased.
The fact that the euro and the Swiss franc is worth a lot more in forints than they did before affected a lot of people. According to The Daily Telegraph, "statistics show that more than 60 percent of Hungarian mortgages and car loans are denominated in foreign currencies".
Though the forint has got stronger, some economists believe that "The Hungarian forint is too strong in the current economic environment".
Natural resources
Nearly 75% of Hungary's landscape consists of flat plains. Additional 20% of the country's area consists of foothills whose altitude is 400 m at the most; higher hills and water surface makes up the remaining 5%.
The two flat plains that take up three quarters of Hungary's area are the Great Hungarian Plain
Great Hungarian Plain
The Great Hungarian Plain is a plain occupying the southern and eastern part of Hungary, some parts of the Eastern Slovak Lowland, southwestern Ukraine, the Transcarpathian Lowland , western Romania , northern Serbia , and eastern Croatia...
and the Little Hungarian Plain
Little Hungarian Plain
The Little Hungarian Plain or Little Alföld is a plain of appr. 8,000 km² in northwestern Hungary, south-western Slovakia , and eastern Austria...
. Hungary's most significant natural resource is arable land. About 83% of the country's total territory is suitable for cultivation; of this portion, 75% (around 50% of the country's area) is covered by arable land, which is an outstanding ratio compared to other EU countries. Hungary lacks extensive domestic sources of energy and raw materials needed for further industrial development.
19% of the country is covered by forests. These are located mainly in the foothills such as the North Hungarian and the Transdanubian Mountains, and the Alpokalja
Alpokalja
Alpokalja is a geographic region in Western Hungary, which is part of the Alps. Its highest point in Hungary is Írott-kő, with 882 metres. Although there are several lower mountains, the majority of the territory is hilly...
. The composition of forests is various; mostly oak or beech, but the rest include fir, willow, acacia and plane.
The major rivers of Hungary are the Danube
Danube
The Danube is a river in the Central Europe and the Europe's second longest river after the Volga. It is classified as an international waterway....
and the Tisza
Tisza
The Tisza or Tisa is one of the main rivers of Central Europe. It rises in Ukraine, and is formed near Rakhiv by the junction of headwaters White Tisa, whose source is in the Chornohora mountains and Black Tisa, which springs in the Gorgany range...
. The Danube also flows through parts of Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, Austria
Austria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
, Slovakia
Slovakia
The Slovak Republic is a landlocked state in Central Europe. It has a population of over five million and an area of about . Slovakia is bordered by the Czech Republic and Austria to the west, Poland to the north, Ukraine to the east and Hungary to the south...
, Serbia
Serbia
Serbia , officially the Republic of Serbia , is a landlocked country located at the crossroads of Central and Southeast Europe, covering the southern part of the Carpathian basin and the central part of the Balkans...
, and Romania
Romania
Romania is a country located at the crossroads of Central and Southeastern Europe, on the Lower Danube, within and outside the Carpathian arch, bordering on the Black Sea...
. It is navigable within Hungary for 418 km. The Tisza River is navigable for 444 km in the country. Hungary has three major lakes. Lake Balaton
Balaton
Balaton may refer to:* Lake Balaton in Hungary, the largest lake in central Europe* Balaton Principality , a Slavic state* Balaton , a Hungarian microcar* Balaton, Minnesota, a city in the United States* 2242 Balaton, a main-belt asteroid...
, the largest, is 78 km long and from 3 to 14 km wide, with an area of 592 km2. Lake Balaton is Central Europe's largest lake and a prosperous tourist spot and recreation area. Its shallow waters offer summer bathing and during the winter its frozen surface provides facilities for winter sports. Smaller bodies of water include Lake Velence
Lake Velence
Lake Velence is the third largest lake in Hungary. It is a popular holiday destination among Hungarians.The lake has an area of 26 km2., one third of which is covered by the common reed...
(26 km2) in Fejér County and Lake Fertő (82 km2 within Hungary).
Transport
Hungary has 31 058 km of roads and motorways of 1118 km. The total length of motorways has doubled in the last ten years with the most (106) kilometers built in 2006. Budapest is directly connected to the AustriaAustria
Austria , officially the Republic of Austria , is a landlocked country of roughly 8.4 million people in Central Europe. It is bordered by the Czech Republic and Germany to the north, Slovakia and Hungary to the east, Slovenia and Italy to the south, and Switzerland and Liechtenstein to the...
n, Slovenia
Slovenia
Slovenia , officially the Republic of Slovenia , is a country in Central and Southeastern Europe touching the Alps and bordering the Mediterranean. Slovenia borders Italy to the west, Croatia to the south and east, Hungary to the northeast, and Austria to the north, and also has a small portion of...
n, Croatia
Croatia
Croatia , officially the Republic of Croatia , is a unitary democratic parliamentary republic in Europe at the crossroads of the Mitteleuropa, the Balkans, and the Mediterranean. Its capital and largest city is Zagreb. The country is divided into 20 counties and the city of Zagreb. Croatia covers ...
n and Serbia
Serbia
Serbia , officially the Republic of Serbia , is a landlocked country located at the crossroads of Central and Southeast Europe, covering the southern part of the Carpathian basin and the central part of the Balkans...
n borders via motorways.
Due to its location and geographical features, several transport corridors cross Hungary. Pan-European corridors
Pan-European corridors
The ten Pan-European transport corridors were defined at the second Pan-European transport Conference in Crete, March 1994, as routes in Central and Eastern Europe that required major investment over the next ten to fifteen years. Additions were made at the third conference in Helsinki in 1997...
no. IV, V, and X, and European routes no. E60
European route E60
European route E 60 is a E-road running from Brest, France , to Irkeshtam, Kyrgyzstan...
, E71
European route E71
European route E 71 is a north-south Class-A intermediate European road route. It begins in Košice, Slovakia, passes through Budapest in Hungary, Zagreb in Croatia and Bihać in Bosnia and Herzegovina, and ends at Split in Croatia on the Adriatic Sea coast. The total length of the route is...
, E73, E75
European route E75
European route E 75 is part of the International E-road network, which is a series of main roads in Europe.The E 75 starts from Vardø, Norway in the Barents Sea and runs south through Finland, Poland, Czech Republic, Slovakia, Hungary, Serbia and Republic of Macedonia to Sitia, Greece on...
, and E77
European route E77
European route E 77 is a part of the inter-European road system. This Class A intermediate north-south route is long and it connects the Baltic Sea with the central part of the continent.-Itinerary:...
go through Hungary. Thanks to its radial road system, all of these routes touch Budapest
Budapest
Budapest is the capital of Hungary. As the largest city of Hungary, it is the country's principal political, cultural, commercial, industrial, and transportation centre. In 2011, Budapest had 1,733,685 inhabitants, down from its 1989 peak of 2,113,645 due to suburbanization. The Budapest Commuter...
.
There are five international, four domestic, four military and several non-public airports in Hungary. The largest airport is the Budapest Ferihegy International Airport
Budapest Ferihegy International Airport
Budapest Liszt Ferenc International Airport , formerly known as Budapest Ferihegy International Airport, is the international airport serving the Hungarian capital city of Budapest, and the largest of the country's five international airports. The airport offers international connections primarily...
(BUD) located at the southeastern border of Budapest. In 2008, the airport had 3,866,452 arriving and 3,970,951 departing passengers.
In 2006 the Hungarian railroad system was 7685 km long, 2791 km of it electrified.
Public utilities
Electricity is available in every settlement in Hungary.Piped gas
Pipeline transport
Pipeline transport is the transportation of goods through a pipe. Most commonly, liquids and gases are sent, but pneumatic tubes that transport solid capsules using compressed air are also used....
is available in 2873 settlements, 91.1% of all of them. To avoid gas shortages due to Ukrainian
Ukraine
Ukraine is a country in Eastern Europe. It has an area of 603,628 km², making it the second largest contiguous country on the European continent, after Russia...
pipeline shutdowns like the one in January 2009, Hungary participates both in the Nabucco
Nabucco Pipeline
The Nabucco pipeline is a proposed natural gas pipeline from Erzurum in Turkey to Baumgarten an der March in Austria diversifying natural gas suppliers and delivery routes for Europe. The pipeline attempts to lessen European dependence on Russian energy...
and the South Stream
South Stream
South Stream is a proposed gas pipeline to transport Russian natural gas to the Black Sea to Bulgaria and further to Greece, Italy and Austria. The project is seen as rival to the planned Nabucco pipeline...
gas pipeline projects. Hungary also has strategical gas reserves: the latest reserve of 1.2 billion cubic meters was opened in October 2009.
In 2008, 94.9% of households had running water. Though it is the responsibility of municipal governments to provide people with healthy water supply, the Hungarian government and the European Union offer subsidies to those who wish to develop water supplies
Water supply
Water supply is the provision of water by public utilities, commercial organisations, community endeavours or by individuals, usually via a system of pumps and pipes...
or sewage systems
Sewage collection and disposal
Sewage collection and disposal systems transport sewage through cities and other inhabited areas to sewage treatment plants to protect public health and prevent disease. Sewage is treated to control water pollution before discharge to surface waters....
. Partly because of these subsidies, 71.3% of all dwellings are connected to the sewage system, up from 50,1% in 2000.
Internet penetration has been rising significantly over the past few years: the ratio of households having an internet connection has risen from 22.1% (49% of which was broadband) in 2005 to 48.4% (87.3% of which was broadband) in 2008.
The Ministry of Economy and Transport introduced the eHungary program in 2004 aiming to provide every person in Hungary with internet access by setting up "eHungary points" in public spaces like libraries, schools and cultural centers. The program also includes "the introduction of the eCounsellor network – a service through which professionals provide assistance for citizens in the effective usage of electronic information, services and knowledge".
Agriculture
Agriculture accounted for 4.3% of GDP in 2008 and along with the food industry occupied roughly 7.7% of the labor force. These two figures represent only the primary agricultural production: along with related businesses, agriculture makes up about 13% of the GDP. Hungarian agriculture is virtually self-sufficient and due to traditional reasons export-oriented: exports related to agriculture make up 20-25% of the total. About half of Hungary’s total land area is agricultural area under cultivation; this ratio is prominent among other EU members. This is due to the country's favourable conditions including continental climateContinental climate
Continental climate is a climate characterized by important annual variation in temperature due to the lack of significant bodies of water nearby...
and the plains
Great Hungarian Plain
The Great Hungarian Plain is a plain occupying the southern and eastern part of Hungary, some parts of the Eastern Slovak Lowland, southwestern Ukraine, the Transcarpathian Lowland , western Romania , northern Serbia , and eastern Croatia...
that make up about half of Hungary’s landscape. The most important crops are wheat, corn, sunflower, potato, sugar beet, canola and a wide variety of fruits (notably apple, peach, pear, grape, watermelon, plum etc.). Hungary has several wine regions producing among others the worldwide famous white dessert wine Tokaji
Tokaji
Tokaji is the name of the wines from the region of Tokaj-Hegyalja in Hungary and Slovakia. The name Tokaji is used for labeling wines from this wine district. This region is noted for its sweet wines made from grapes affected by noble rot, a style of wine which has a long history in this region...
and the red Bull’s Blood. Another traditional world-famous alcoholic drink is the fruit brandy pálinka
Palinka
Pálinka or Palincă is a traditional fruit brandy made in regions of the Carpathian Basin. Modern commercial production occurs in Hungary, Romania and parts of Austria. It is commonly made from the fermentation of plums, but other fruits used include apricots, apples, pears, peaches and cherries...
.
Mainly cattle, pigs, poultry and sheep are raised in the country. The livestock includes the Hungarian Grey Cattle
Hungarian Grey Cattle
Hungarian Grey Cattle or Hungarian Steppe Cattle are an old beef cattle breed from Hungary....
which is a major tourist attraction in the Hungarian National Park of Hortobágy
Hortobágy
Hortobágy is both the name of a village in Hajdú-Bihar county and an 800 km² national park in Eastern Hungary, rich with folklore and cultural history. The park, a part of the Alföld , was designated as a national park in 1973 , and elected among the World Heritage sites in 1999...
. An important component of the country’s gastronomic heritage is foie gras
Foie gras
Foie gras ; French for "fat liver") is a food product made of the liver of a duck or goose that has been specially fattened. This fattening is typically achieved through gavage corn, according to French law, though outside of France it is occasionally produced using natural feeding...
with about 33000 farmers engaged in the industry. Hungary is the second largest world producer and the biggest exporter of foie gras (exporting mainly to France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
).
Another symbol of Hungarian agriculture and cuisine is the paprika
Paprika
Paprika is a spice made from the grinding of dried fruits of Capsicum annuum . In many European languages, the word paprika refers to bell peppers themselves. The seasoning is used in many cuisines to add color and flavor to dishes. Paprika can range from mild to hot...
(both sweet and hot types). The country is one of the leading paprika producers of the world with Szeged
Szeged
' is the third largest city of Hungary, the largest city and regional centre of the Southern Great Plain and the county town of Csongrád county. The University of Szeged is one of the most distinguished universities in Hungary....
and Kalocsa
Kalocsa
Kalocsa is a town in Bács-Kiskun county, Hungary. It lies 88 miles south of Budapest. It is situated in a marshy but highly productive district, near the left bank of the Danube River. Historically it had greater political and economic importance than at present.Kalocsa is the Episcopal see...
being the centres of production.
Health care
Industry
The main sectors of Hungarian industry are heavy industry (mining, metallurgy, machine and steel production), energy production, mechanical engineering, chemicals, food industry and automobile production. The industry is leaning mainly on processing industry and (including construction) accounted for 29,32% of GDP in 2008. Due to the sparse energy and raw material resources, Hungary is forced to import most of these materials to satisfy the demands of the industry. Following the transition to market economy, the industry underwent restructuring and remarkable modernization. The leading industry is machinery, followed by chemical industry (plastic production, pharmaceuticals), while mining, metallurgyMetallurgy
Metallurgy is a domain of materials science that studies the physical and chemical behavior of metallic elements, their intermetallic compounds, and their mixtures, which are called alloys. It is also the technology of metals: the way in which science is applied to their practical use...
and textile industry seemed to be losing importance in the past two decades. In spite of the significant drop in the last decade, food industry is still giving up to 14% of total industrial production and amounts to 7-8% of the country's exports.
Nearly 50% of energy consumption is dependent on imported energy sources. Gas and oil are transported through pipelines from Russia forming 72% of the energy structure, while nuclear power produced by the nuclear power station of Paks
Paks Nuclear Power Plant
The Paks Nuclear Power Plant , located from Paks, central Hungary, is the first and only operating nuclear power station in Hungary. Altogether, its four reactors produce more than 40 percent of the electrical power generated in the country.-Technical parameters:VVER is the Soviet designation for...
accounts for 12%.
Automobile production
Hungary is a favoured destination of foreign investors of automotive industry resulting in the presence of General MotorsGeneral Motors
General Motors Company , commonly known as GM, formerly incorporated as General Motors Corporation, is an American multinational automotive corporation headquartered in Detroit, Michigan and the world's second-largest automaker in 2010...
(Szentgotthárd
Szentgotthárd
Szentgotthárd is the westernmost town of Hungary. It is situated on the Rába River near the Austrian border, and is home to much of Hungary's small Slovene ethnic minority....
), Magyar Suzuki
Magyar Suzuki
Magyar Suzuki Corporation, located in Esztergom, Hungary, and founded in 1991, is a automobile manufacturing plant, a subsidiary of Suzuki.Through the end of September, 2005, the plant had a cumulative production volume of 849,000: 465,000 Suzuki Swift through March, 2003, 187,000 Suzuki Wagon R+,...
(Esztergom
Esztergom
Esztergom , is a city in northern Hungary, 46 km north-west of the capital Budapest. It lies in Komárom-Esztergom county, on the right bank of the river Danube, which forms the border with Slovakia there....
) and the largest Audi
Audi
Audi AG is a German automobile manufacturer, from supermini to crossover SUVs in various body styles and price ranges that are marketed under the Audi brand , positioned as the premium brand within the Volkswagen Group....
factory (Győr
Gyor
-Climate:-Main sights:The ancient core of the city is Káptalan Hill at the confluence of three rivers: the Danube, Rába and Rábca. Püspökvár, the residence of Győr’s bishops can be easily recognised by its incomplete tower. Győr’s oldest buildings are the 13th-century dwelling tower and the...
) in Central Europe.
17% of the total Hungarian exports comes from the exports of Audi, Opel and Suzuki. The sector employs about 90.000 people in more than 350 car component manufacturing companies.
Audi has built the largest engine manufacturing plant of Europe (third largest in the world) in Győr
Gyor
-Climate:-Main sights:The ancient core of the city is Káptalan Hill at the confluence of three rivers: the Danube, Rába and Rábca. Püspökvár, the residence of Győr’s bishops can be easily recognised by its incomplete tower. Győr’s oldest buildings are the 13th-century dwelling tower and the...
becoming Hungary's largest exporter with total investments reaching over € 3,300 million until 2007. Audi's workforce assembles the Audi TT
Audi TT
The Audi TT is a two-door sports car manufactured by the German automaker and Volkswagen Group subsidiary Audi since 1998.The Audi TT has been produced in two generations. Both generations have been available in two car body styles; as a 2+2 Coupé, or two-seater Roadster...
, the Audi TT Roadster and the A3 Cabriolet
Audi A3
The Audi A3 is a small family car produced by the German automaker Audi since 1996. Two generations of A3 exist, both based on the Volkswagen Group A platform, which they share with several other models such as the Audi TT, Volkswagen Golf, Volkswagen Caddy and Volkswagen Touran as well as SEAT...
in Hungary. The plant delivers engines to carmakers Volkswagen, Skoda, Seat and also to Lamborghini.
Daimler-Benz
Daimler-Benz
Daimler-Benz AG was a German manufacturer of automobiles, motor vehicles, and internal combustion engines; founded in 1926. An Agreement of Mutual Interest - which was valid until year 2000 - was signed on 1 May 1924 between Karl Benz's Benz & Cie., and Daimler Motoren Gesellschaft, which had...
invests € 800 million ($1.2 billion) and creates up to 2,500 jobs at a new assembly plant in Kecskemét
Kecskemét
Kecskemét is a city in the central part of Hungary. It is the 8th largest city of the country, and the county seat of Bács-Kiskun.Kecskemét lies halfway between the capital Budapest and the country's third-largest city, Szeged, 86 kilometres from both of them and almost equal distance from the two...
, Hungary with capacity for producing 100,000 Mercedes-Benz
Mercedes-Benz
Mercedes-Benz is a German manufacturer of automobiles, buses, coaches, and trucks. Mercedes-Benz is a division of its parent company, Daimler AG...
compact cars a year.
Opel
Opel
Adam Opel AG, generally shortened to Opel, is a German automobile company founded by Adam Opel in 1862. Opel has been building automobiles since 1899, and became an Aktiengesellschaft in 1929...
produced 80,000 Astra and 4,000 Vectra cars from March 1992 until 1998 in Szentgotthárd
Szentgotthárd
Szentgotthárd is the westernmost town of Hungary. It is situated on the Rába River near the Austrian border, and is home to much of Hungary's small Slovene ethnic minority....
, Hungary. Today, the plant produces about half million engines and cylinder heads a year.
Services
The tertiary sector accounted for 64% of GDP in 2007 and its role in the Hungarian economy is steadily growing due to constant investments into transport and other services in the last 15 years. Located in the heart of Central-Europe, Hungary’s geostrategic location plays a significant role in the rise of the service sector as the country’s central position makes it suitable and rewarding to invest.The total value of imports was 68,62 billion euros, the value of exports was 68,18 billion euros in 2007. The external trade deficit decreased by 12,5% since the previous year, easing down from 2,4 billion to 308 million euros in 2007. In the same year, 79% of Hungary’s export and 70% of the imports were transacted inside the EU.
Tourism
Tourism employs nearly 150 thousand people and the total income from tourism was 4 billion euros in 2008. One of Hungary’s top tourist destinations is Lake Balaton
Lake Balaton
Lake Balaton is a freshwater lake in the Transdanubian region of Hungary. It is the largest lake in Central Europe, and one of its foremost tourist destinations. As Hungary is landlocked , Lake Balaton is often affectionately called the "Hungarian Sea"...
, the largest freshwater lake in Central Europe, with a number of 1,2 million visitors in 2008. The most visited region is Budapest
Budapest
Budapest is the capital of Hungary. As the largest city of Hungary, it is the country's principal political, cultural, commercial, industrial, and transportation centre. In 2011, Budapest had 1,733,685 inhabitants, down from its 1989 peak of 2,113,645 due to suburbanization. The Budapest Commuter...
, the Hungarian capital attracted 3,61 million visitors in 2008.
Hungary was the world’s 26th most visited country in 2007. The Hungarian spa culture is world-famous, with thermal baths of all sorts and over 50 spa hotels located in many towns, each of which offer the opportunity of a pleasant, relaxing holiday and a wide range of quality medical and beauty treatments.
Currency
The currency of Hungary is the Hungarian forint (HUF, Ft) since 1 August 1946. A forint consists of 100 fillérs, however, these have not been in circulation since 1999, they are only used in accounting.
There are six coins
Coins of the Hungarian forint
Hungarian forint coins are part of the physical form of current Hungarian currency, the Hungarian forint. Modern forint coins are stroke since 1946 and reflect the changes of the post-WWII Hungarian history.-Republic issues :After the trauma of the Second World War and the hyperinflation of...
(5, 10, 20, 50, 100, 200) and six banknotes
Banknotes of the Hungarian forint
Hungarian forint paper money is part of the physical form of the current Hungarian currency, the Hungarian forint. The forint paper money consists of exclusively banknotes. During its history, denominations ranging from 10 to 20 000 forint were put into circulation in correspondence with the...
(500, 1000, 2000, 5000, 10000 and 20000). The 1 and 2 forint coins were withdrawn in 2008, yet prices remained the same as stores follow the official rounding scheme for the final price. The 200 forint note was withdrawn on 16 November 2009.
As a member of the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
, the long term aim of the Hungarian government is to replace the forint with the euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
. See also: Fiscal policy.
You can check current exchange rates with graphs of past rates at Google Finance.
The fulfillment of the Maastricht criteria
| Obligation to adopt 4 | Euro coins Euro coins There are eight euro coin denominations, ranging from one cent to two euros . The coins first came into use in 2002. They have a common reverse, portraying a map of Europe, but each country in the eurozone has its own design on the obverse, which means that each coin has a variety of different... design |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| Country 1 | |Inflation rate Inflation rate In economics, the inflation rate is a measure of inflation, the rate of increase of a price index . It is the percentage rate of change in price level over time. The rate of decrease in the purchasing power of money is approximately equal.The inflation rate is used to calculate the real interest... ² | Government Government Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized... finances | ERM II European Exchange Rate Mechanism The European Exchange Rate Mechanism, ERM, was a system introduced by the European Community in March 1979, as part of the European Monetary System , to reduce exchange rate variability and achieve monetary stability in Europe, in preparation for Economic and Monetary Union and the introduction of... membership | Interest rate Interest rate An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for... ³ | recommended by the Commission European Commission The European Commission is the executive body of the European Union. The body is responsible for proposing legislation, implementing decisions, upholding the Union's treaties and the general day-to-day running of the Union.... |
||||
| annual government Government Government refers to the legislators, administrators, and arbitrators in the administrative bureaucracy who control a state at a given time, and to the system of government by which they are organized... deficit to GDP Gross domestic product Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living.... | gross government debt Government debt Government debt is money owed by a central government. In the US, "government debt" may also refer to the debt of a municipal or local government... to GDP Gross domestic product Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living.... |
||||||||
| Reference value 5 | max 3.2% | max. 3% | max. 60% | min. 2 years | max 6.5% | NA | NA | NA | NA |
| 5.3% | 4% | 76.9% | 0 years | 5.25% | yes | 2014–2015 | NA | in progress Hungarian euro coins Hungary can replace its currency, the forint at the earliest on 1 January 2020, according to Viktor Orbán, the prime minister of the country. There is no target date and the forint is not part of European Exchange Rate Mechanism... |
1 Current EU member states that have not yet adopted the Euro, candidates and official potential candidates.
² No more than 1.5% higher than the 3 best-performing EU member states.
³ No more than 2% higher than the 3 best-performing EU
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
member states.
4 Formal obligation for Euro adoption in the country EU Treaty of Accession
Treaty of Accession 2003
The Treaty of Accession 2003 was the agreement between the European Union and ten countries , concerning these countries' accession into the EU...
or the Framework for membership negotiations.
5 Values from May 2008 report. To be updated each year.
Human capital
Education in HungaryEducation in Hungary
-The social environment of education:The decline of Hungary's population that started in 1981 has also continued in recent years. According to the 2001 census, the population of Hungary was 10,198,000, about half a million less than the figure of twenty years earlier. By 2005 the population dropped...
is free and compulsory from the age of 5 to 18. The state provides free pre-primary schooling for all children, 8 years of general education and 4 years of upper secondary level general or vocational education. Higher education system follows the three-cycle structure and the credit system of the bologna process
Bologna process
The purpose of the Bologna Process is the creation of the European Higher Education Area by making academic degree standards and quality assurance standards more comparable and compatible throughout Europe, in particular under the Lisbon Recognition Convention...
. Governments aim to reach European standards and encourage international mobility by putting emphasis on digital literacy, and enhancing foreign language studies: all secondary level schools teach foreign languages and at least one language certificate is needed for the acquisition of a diploma. Over the past decade, this resulted in a drastic increase in the number of people speaking at least one foreign language.
Hungary's most prestigious universities are:
- Eötvös Loránd University (Eötvos Loránd Tudományegyetem, or ELTE, which is among the top 500 universities in the world)
- Budapest University of Technology and EconomicsBudapest University of Technology and EconomicsThe Budapest University of Technology and Economics , in hungarian abbreviated as BME, English official abbreviation BUTE, is the most significant University of Technology in Hungary and is also one of the oldest Institutes of Technology in the world, having been founded in 1782.-History:BME is...
(Budapesti Műszaki és Gazdaságtudományi Egyetem, or BME) BME is considered the oldest Institutes of Technology of university rank and structure in the world. Established 1782. - Corvinus University of BudapestCorvinus University of BudapestThe Corvinus University of Budapest is one of the most prestigious Hungarian universities located in Budapest, Hungary. The university offers degrees in multiple disciplines, but it is characterised by its programmes in economics and management. -History:...
(Budapesti Corvinus Egyetem, or BCE) - Central European UniversityCentral European UniversityFor other uses, see European University Central European University is a graduate-level, English-language university offering degrees in the social sciences, humanities, law, public policy, business management, environmental science, and mathematics...
(Közép-európai Egyetem, or CEU) - University of PécsUniversity of PécsThe University of Pécs is the Hungarian university with the largest number of students and faculties.-History:...
(Pécsi Tudományegyetem, or PTE) - University of SzegedUniversity of SzegedThe University of Szeged is one of Hungary's most distinguished universities, and is among the most prominent higher education institutions in Central Europe...
(Szegedi Tudományegyetem or SZTE) In 2010, the QS World University Rankings put the University of Szeged as 451st-500th among universities globally. - University of DebrecenUniversity of DebrecenThe University of Debrecen is a university located in Debrecen, Hungary. It is the oldest continuously operating institution of higher education in Hungary .-History:...
(Debreceni Egyetem or DE)
Financial sources for education are mainly provided by the state (making up 5.1-5.3% of the annual GDP). In order to improve the quality of higher education, the government encourages contributions by students and companies. Another important contributor is the EU.
The system has weaknesses, the most important being segregation and unequal access to quality education. The 2006 PISA report concluded that while students from comprehensive schools did better than the OECD average, pupils from vocational secondary schools did much worse. Another problem is of the higher education’s: response to regional and labour market needs is insufficient. Government plans include improving the career guidance system and establishing a national digital network that will enable the tracking of jobs and facilitate the integration into the labour market.
Social stratification
As most post-communist countries, Hungary’s economy is affected by its social stratification in terms of income and wealth, age, gender and racial inequalities.Hungary’s Gini coefficient
Gini coefficient
The Gini coefficient is a measure of statistical dispersion developed by the Italian statistician and sociologist Corrado Gini and published in his 1912 paper "Variability and Mutability" ....
of 0.269 ranks 11th in the world. The graph on the right shows that Hungary is close in equality to the world-leader Denmark
Denmark
Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark...
. The highest 10% of the population gets 22.2% of the incomes. According to the business magazine Napi Gazdaság, the owner of the biggest fortune, 300 billion HUF, is Sándor Demján. On the other hand, the lowest 10% gets 4% of the incomes. Considering the standard EU indicators (Percentage of the population living under 60% of the per capita median income), 13% of the Hungarian population is stricken by poverty. According to the Human Development Report
Human Development Report
The Human Development Report is an annual milestone publication by the Human Development Report Office of the United Nations Development Programme .-History:...
, the country’s HPI-1
Human Poverty Index
The Human Poverty Index is an indication of the standard of living in a country, developed by the United Nations . For highly developed countries, the UN considers that it can better reflect the extent of deprivation compared to the Human Development Index....
value is 2.2% (3rd among 135 countries), and its HDI
Human Development Index
The Human Development Index is a composite statistic used to rank countries by level of "human development" and separate "very high human development", "high human development", "medium human development", and "low human development" countries...
value is 0.879 (43rd out of 182).
The fertility rate in Hungary, just like in many European countries, is very low: 1.34 children/women (205th in the world) Life expectancy at birth is 73.3 years., while the expected number of healthy years is 57.6 for females and 53.5 for males. The average life expectancy overall is 73.1 years.
Hungary’s GDI (gender-related development index)
GDI
GDI may stand for:* Gasoline direct injection, a modern variant of fuel injection* Gay Doctors Ireland, an independent grouping of LGBT medical professionals in Ireland...
value of 0.879 is 100% of its HDI value (3rd best in the world). 55.5% of the female population (between 15 and 64) participate in the labour force, and the ratio of girls to boys in primary and secondary education is 99%.
Racial inequality, which strikes primarily Roma in Hungary, is a serious problem. Although the definition of the Roma identity is controversial, qualitative studies prove that the Roma employment rate decreased significantly following the fall of Communism: due to the tremendous layoffs of unskilled workers during the transition years, more than one-third of Roma were excluded from the labour market. Therefore, this ethnic conflict is inherently interconnected with the income inequalities in the country – at least two-thirds of the poorest 300,000 people in Hungary are Romas. Furthermore, ethnic discrimination is outstandingly high, 32% of Romas experience discrimination when looking for work. Consequently, new Roma entrants to the labour market are rarely able to find employment, which creates a motivation deficit and further reinforces segregation
Racial segregation
Racial segregation is the separation of humans into racial groups in daily life. It may apply to activities such as eating in a restaurant, drinking from a water fountain, using a public toilet, attending school, going to the movies, or in the rental or purchase of a home...
and unemployment.
Institutional quality
Twenty years after the change of the regime, corruptionPolitical corruption
Political corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...
remains to be a severe issue in Hungary. According to Transparency International
Transparency International
Transparency International is a non-governmental organization that monitors and publicizes corporate and political corruption in international development. It publishes an annual Corruption Perceptions Index, a comparative listing of corruption worldwide...
Hungary, almost one-third of top managers claim they regularly bribe politicians. Most people (42%) in Hungary think that the sector most affected by bribery is the political party system. Bribery is common in the healthcare system
Healthcare in Hungary
The free-market shift initiated after the end of the communist rule twenty years ago put a strain on the largely centralised, wholly tax-funded public health system, which required far-reaching reforms. These resulted in the creation of the National Healthcare Fund , in 1993...
in the form of gratitude payment–92% of all people think that some payment should be made to the head surgeon conducting a heart operation or an obestetrician for a child birth.
Another problem is the administrative burden: in terms of the ease of doing business, Hungary ranks 47th out of 183 countries in the world. The five days’ time required to start a new business ranks 29th, and the country is 122nd concerning the ease of paying taxes.
In accordance with the theory of the separation of powers
Separation of powers
The separation of powers, often imprecisely used interchangeably with the trias politica principle, is a model for the governance of a state. The model was first developed in ancient Greece and came into widespread use by the Roman Republic as part of the unmodified Constitution of the Roman Republic...
, the judicial system is independent from the legislative and the executive branches. Consequently, courts and prosecutions are not influenced by the government. However, the legal system is slow and overburdened, which makes proceedings and rulings lengthy and inefficient. Such a justice system is hardly capable of prosecuting corruption and protecting the country’s financial interests.
Monetary policy
The Hungarian organization responsible for controlling the country's monetary policy is the Hungarian National BankHungarian National Bank
The Hungarian National Bank is the central bank of Hungary. The principal aim of the bank is to retain price stability. It is also responsible for issuing the national currency, the forint, controlling the cash circulation, setting the Central Bank base rate, publishing official exchange rates...
(Hungarian: Magyar Nemzeti Bank, MNB) which is the central bank in Hungary. According to the Hungarian Law of National Bank (which became operative in 2001. – LVIII. Law about The Hungarian National Bank), the primary objective of MNB is to achieve and maintain price stability. This aim is in line with the European and international practice.
Price stability means achieving and maintaining a basically low, but positive inflation rate. This level is around 2-2.5% according to international observations, while the European Central Bank
European Central Bank
The European Central Bank is the institution of the European Union that administers the monetary policy of the 17 EU Eurozone member states. It is thus one of the world's most important central banks. The bank was established by the Treaty of Amsterdam in 1998, and is headquartered in Frankfurt,...
"aims at inflation rates of below, but close to 2% over the medium term". Since Hungary is in the process of catching up (Balassa-Samuelson effect
Balassa-Samuelson effect
The Balassa–Samuelson effect, also known as Harrod–Balassa–Samuelson effect , the Ricardo–Viner–Harrod–Balassa–Samuelson–Penn–Bhagwati effect , productivity biased purchasing power parity and the rule of five eights is either of two related things:#The observation that consumer price levels...
), the long-term objective is a slightly higher figure, around 2.3-3.2%. Therefore the medium term inflation target of the Hungarian National Bank is 3%.
Concerning the exchange rate system, the floating exchange rate
Floating exchange rate
A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency....
system is in use since 26 February 2008, as a result of which HUF is fluctuating in accordance with the effects of the market in the face of the reference currency, the euro.
The chart on the right shows forint exchange rates for the British pound
Pound sterling
The pound sterling , commonly called the pound, is the official currency of the United Kingdom, its Crown Dependencies and the British Overseas Territories of South Georgia and the South Sandwich Islands, British Antarctic Territory and Tristan da Cunha. It is subdivided into 100 pence...
(GBP), euro
Euro
The euro is the official currency of the eurozone: 17 of the 27 member states of the European Union. It is also the currency used by the Institutions of the European Union. The eurozone consists of Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,...
(EUR), Swiss franc
Swiss franc
The franc is the currency and legal tender of Switzerland and Liechtenstein; it is also legal tender in the Italian exclave Campione d'Italia. Although not formally legal tender in the German exclave Büsingen , it is in wide daily use there...
(CHF), and the U.S. dollar
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
(USD) from June 2008 to September 2009. It indicates that a relatively strong forint weakened since the beginning of the financial crisis, and that its value has recently taken an upward turn.
Compared to the euro the forint was at peak on June 18, 2008 when 1000 Ft was 4.36€ and 1€ was 229.11Ft. The forint was worth the least on March 6, 2009; this day 1000 Ft was 3.16€ and 1€ was 316Ft).
Compared to USD, most expensive/cheapest dates are June 22, 2008 and March 6, 2009 with 1000HUF/USD rates 6.94 and 4.01 respectively.
Fiscal policy
In Hungary, state revenue makes up 44% and expenditure makes up 45% of the GDP which is relatively high compared to other EU members. This can be traced back to historical reasons such as socialist economic tradition as well as cultural characteristics that endorse paternalist beaviour on the state’s part, meaning that people have a habitual reflex that make them call for state subsidies. Some economists dispute this point, claiming that expenditure ran up to today’s critical amount from 2001, during two left-wing government cycles.Along with joining the EU the country undertook the task of joining the Eurozone
Eurozone
The eurozone , officially called the euro area, is an economic and monetary union of seventeen European Union member states that have adopted the euro as their common currency and sole legal tender...
as well. Therefore, the Maastricht criteria which forms the conditionalities of joining the Eurozone acts as an authoritative guideline to Hungarian fiscal politics. Although there has been remarkable progress, recent years’ statistics still point at significant discrepancies between the criteria and fiscal indices. The target date for adapting the Euro has not been fixed, either.
General government deficit has shown a drastic decline to -3.4% (2008) from -9.2% (2006). According to an MNB forecast however, until 2011, the deficit will by a small margin fall short of the 3.0% criterion.
Another criterion that is found lacking is the ratio of gross government debt to GDP which, since 2005, exceeds the allowed 60%. According to an ESA95
European System of Accounts
The European System of Accounts is the system of national accounts and regional accounts used by members of the European Union. It was most recently updated in 1995 ....
figure, in 2008 the ratio increased from 65.67% to 72.61%, which primarily results from the requisition of an IMF-arranged financial assistance package.
Hungary’s balance of payments on its current account has been negative since 1995, around 6-8% in the 2000s reaching a negative peak 8.5% in 2008. Still, current account deficit will expectedly decrease in the following period, as imports will diminish compared to exports as an effect of the financial crisis.
Tax system
In Hungary, the 1988 reform of taxes introduced a comprehensive tax system which mainly consists of central and local taxes, including a personal income taxIncome tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
, a corporate income tax
Corporate tax
Many countries impose corporate tax or company tax on the income or capital of some types of legal entities. A similar tax may be imposed at state or lower levels. The taxes may also be referred to as income tax or capital tax. Entities treated as partnerships are generally not taxed at the...
and a value added tax
Value added tax
A value added tax or value-added tax is a form of consumption tax. From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the "value added" to a product, material or service, from an accounting point of view, by this stage of its...
. Among the total tax income the ratio of local taxes is solely 5% while the EU average is 30%.
The central tax system consists of three components:
Personal income tax
The taxation of an individual is progressive, determining the tax rate based on the individual’s income: with earning up to 1,900,000 forints a year, the tax is 18%, the tax on incomes above this limit is 36% since 1 of July, 2009.
According to the income-tax returns of 2008, 14,6% of taxpayers was charged for 64,5% of the total tax burdens.
Corporate income tax
Corporate tax is fixed at 16% of the positive rateable value, with an additional tax called solidarity tax of 4%, the measure of which is calculated based on the result before tax of the company (the solidarity tax has been in use since September, 2006). The actual rateable value might be different is the two cases.
Value added tax (VAT)
The rate of value added tax in Hungary is 25% since 1 of July, 2009. At the same time, reduced rates of 18% came into practice, concerning basic food (milk, flavoured milk, dairy products, corn, flour) and distance heating, medicines have a rate of 5%.
Miscellaneous data
Households with access to fixed and mobile telephone access- landline telephone - 50% (2009)
- mobile telephone - 84% (2009)
Broadband penetration rate
- fixed broadband- 18.7% (2010)
- mobile broadband- 3.8% (2009)
Individuals using computer and internet
- computer - 65% (2009)
- internet - 62% (2009)
The EU
Hungary joined the European Union on 05/01/2004 after a successful referendum among the EU-102004 enlargement of the European Union
The 2004 enlargement of the European Union was the largest single expansion of the European Union , both in terms of territory, number of states and population, however not in terms of gross domestic product...
. The EU's free trade system helps Hungary, as it is a relatively small country and thus needs export and import.
After the accession to the EU, Hungarian workers could immediately go to work to Ireland, Sweden and the United Kingdom. Other countries imposed restrictions.
Foreign trade
In 2007, 25% of all exports of Hungary were of high technology, which is the 5th largest ratio in the European Union after Malta, Cyprus, Ireland, and the Netherlands. The EU10 average was 17.1% and the Eurozone average was 16% in 2007.See also
- Hungarian National BankHungarian National BankThe Hungarian National Bank is the central bank of Hungary. The principal aim of the bank is to retain price stability. It is also responsible for issuing the national currency, the forint, controlling the cash circulation, setting the Central Bank base rate, publishing official exchange rates...
- List of Hungarian companies
- List of banks in Hungary
- Budapest Stock ExchangeBudapest Stock ExchangeThe Budapest Stock Exchange was re-opened in 1990 with headquarters in Budapest, Hungary.BSE is the key institution of the Hungarian Financial market and the official trading venue for publicly offered securities....
- BUXBUXThe BUX is a stock index of large companies traded on the Budapest Stock Exchange.-Components:As of Apr 1, 2011:*OTP Bank ,*MOL ,*Richter Gedeon ,*Magyar Telekom ,*Egis ,*CIG Pannonia ,*FHB ,...
- Economy of EuropeEconomy of EuropeThe economy of Europe comprises more than 731 million people in 48 different states. Like other continents, the wealth of Europe's states varies, although the poorest are well above the poorest states of other continents in terms of GDP and living standards. The difference in wealth across...
- HungaryHungaryHungary , officially the Republic of Hungary , is a landlocked country in Central Europe. It is situated in the Carpathian Basin and is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. The...
- Tourism in HungaryTourism in HungaryThere is a long history of tourism in Hungary, and Hungary was the world's thirteenth most visited tourist destination country in 2002. Tourism increased by nearly 7 per cent between 2004 and 2005. European visitors comprise more than 98 per cent of Hungary's tourists. Austria, Germany, and...
External links
- Hungarian National Bank
- Hungarian Central Statistical Office
- Hungarian Financial Supervisory Authority
- Hungarian Competition Authority
- Ministry of Finance
- OECD's Hungary country web site
- OECD economic survey of Hungary
- Hungarian IT: Coping With Economic Transition And Globalisation
- The Political and Economic Transition in Hungary
- CIA The World Factbook
- Economy of Hungary