A small country in Eastern Europe is widely known for its tough policy towards migrants from the Middle East and North Africa. The Hungarian economy is largely dependent on the work of transnational corporations. More than 50% of the country's GDP is produced by enterprises with foreign capital, which is much higher than the generally accepted optimal level of 30%.
General information
Hungary is a continental state in Eastern Europe, with a population of about 10 million people (89th place in the world) and an area of 93 sq. km (109th place). Has no access to the sea. Most of the population (54.5%) professes Catholicism, the second largest community is the community of Protestant Calvinists - 15.9%. In terms of ethnic composition, it is practically mono-ethnic, Hungarians make up 92.3%, 95% of the population consider Hungarian to be their native language.
In the form of government, it is a unitary parliamentary republic. The legislature is the National Assembly, whichelected by the citizens of the country for 4 years. Parliament elects the president, who performs primarily representative functions. Executive functions, including the management of the Hungarian economy, are carried out by the Prime Minister and the Cabinet of Ministers.
Goulash communism
The country converted to Christianity in 1000 AD and for a long time resisted the Turkish expansion of the Ottoman Empire into Europe. For several centuries, a small Christian kingdom resisted a huge Muslim empire. After that, the country became part of the Austro-Hungarian Empire, which collapsed following the results of the First World War. After the Second World War, it fell into the sphere of influence of the Soviet Union. In 1956, only Moscow's military intervention stopped the country's withdrawal from the socialist camp.
The liberalization of the economic system began in 1968. When businesses and people were given the freedom to do business. When asked what kind of economy in Hungary, then they answered "goulash communism", the so-called socialism, which they began to build under Janos Kadar. In 1990, the country held multi-party elections for the first time in post-war history and finally began the transition to a free market economy. In 1999, the country joined the North Atlantic bloc, and five years later it was admitted to the European Union.
Economic Review
Hungary has almost completed the transition from a centrally planned economy to a free market economy. However, in recentdecades, the government began to intervene more actively in the management of the economy. Budapest has used unorthodox economic policies to increase household consumption. The funds invested by the EU in projects to stimulate the growth of the Hungarian economy were also quite effective.
The country's per capita income has reached about two-thirds of the European Union average. The minimum wage set by the government in 2018 is HUF 137,000.
The country's economy is heavily dependent on exports, which have reached an estimated $101 billion. The biggest trading partner is Germany, followed by the US and Romania. The main export positions are industrial equipment and goods, food, raw materials.
Some indicators
Belongs to the type of post-industrial states with a predominant service sector (64.8%), export-oriented industry occupies 31.3%, and highly developed agriculture - 3.9%. Hungary is a country in transition, where market reforms are almost completed. The country has a well-developed infrastructure, a relatively high level of education and qualifications of workers. The population has good social mobility and receptivity to innovation.
According to statistics, the Hungarian economy with a GDP of $120.12 billion in 2017 is in 56th place in the world. GDP per capita at PPP is $28,254.76 (ranked 49th). Despite the fact that the country is part of the European Union, the nation althe currency is the Hungarian forint.
Key industry is industry
The main sectors of the Hungarian economy are high-tech industry, agriculture and services, especially tourism.
Highly developed industry (engineering, production of communications equipment, measuring instruments, machine tools) provides the bulk of export products. The material and energy-intensive production created with the assistance of the Soviet Union is gradually decreasing. Thus, Ikarus, once the largest bus manufacturer in Europe, has been reduced to a small bus-building enterprise. Thanks to a good investment climate, many modern factories of global corporations have been built in the country, including the automobile plants of Audi, Suzuki and General Motors, and the electrical plants of Samsung, Philips and General Electric.
Since the socialist times, the pharmaceutical and chemical industries have been working well. The country has developed metallurgical production, especially aluminum, which works on local raw materials. In the energy sector, the country seeks to reduce its dependence on the import of petroleum products, therefore it is developing the nuclear industry and renewable energy sources.
Other industries
Due to good climatic conditions, the country is famous for its agricultural products. Since 1990, privatization and restructuring of the industry began. Ownership of the land was returned, many cooperativesdisbanded, and their lands were privatized. Now in agriculture there are both private and family farms, as well as cooperative farms and land associations. Most of the arable land is privately owned.
Wheat, corn, sugar beets, sunflowers, various vegetables are grown, including onions, cucumbers, peppers. Developed wine production is known for its table wines, Hungarian Tokay wine (from the slopes of Mount Tokay) is especially popular in Europe.
Products of enterprises for the processing of agricultural products are supplied to many countries of the world: compotes, juices, canned vegetables and meat. Famous from Soviet times, the Hungarian "Globus" is one of the few brands that have survived in the country since the days of "goulash communism". The company occupies more than a third of the local canned vegetable market. True, the presence of products on the Russian market is insignificant.
International tourism is one of the leading sectors of the Hungarian economy, generating up to 10% of GDP. The stable economic and political situation has made the industry very attractive for foreign investment.
Natural resources
The country's most important natural resources are fertile arable land and water resources. More than half of the Hungarian lands are arable. Which, together with the mild climate and vast reservoirs, create excellent conditions for agriculture.
The country is experiencing a shortage of energy resources, the deposits of which are relatively few. high qualityhard coal is mined in the Komlo region, brown coal near Ozd in the Northern Mountains and in the Transdanubia region. Previously mined local coal fully satisfied the country's energy needs. Due to the development of industry, it currently provides no more than a third of the needs of the Hungarian economy.
The country's most significant mineral resource is bauxite, one of the best European deposits is located on its territory. Raw materials are processed by the Hungarian steel industry. Manganese ores are mined in the Bakony mountains. In addition, copper, lead, zinc and uranium ores are mined. Mined in relatively small quantities of molybdenum, dolomite, kaolin.
Strengths
Hungary's main advantage is its good investment climate, which has encouraged a large influx of foreign direct investment. A fairly efficient tax system has been built in the country, bureaucratic procedures have been significantly reduced.
The Hungarian economy, having strengthened by the end of the 90s, is demonstrating stable growth based on the stimulation of foreign trade. It has a well-developed industrial production, especially in new modern companies and branches of transnational corporations. The national currency has been fully convertible since 2001. Inflation is at an acceptable level and is steadily declining.
Weaknesses
Weaknesses of Hungary's transitional economy include insufficient domestic energy production. Strong differentiation of regions bylevel of development, when the eastern, predominantly agricultural, territories do not receive sufficient investment.
In addition, there is a significant difference in the technical equipment of enterprises with foreign participation and purely Hungarian ones. There is a significant difference in the level of incomes of the population in the country. The country is on the "black list" of the OECD due to poor money laundering control. Speaking briefly about the weaknesses of the Hungarian economy, it is, first of all, the legacy of socialism.
Transition to a market economy
After the destruction of the socialist camp at the end of the 20th century, the Hungarian economy experienced a significant decline due to the decline in exports and the cessation of financial assistance from the former Soviet Union. The country embarked on sweeping economic reforms that included privatizing most state-owned enterprises, cutting social spending, and refocusing on trade with Western countries.
The measures taken stimulated growth, attracted foreign investment and reduced national debt obligations. The transition from a centralized to a market economy had a strong impact on the standard of living of the population. Living conditions in the early years deteriorated significantly against the backdrop of strong inflation. A gradual improvement occurred as the reforms succeeded and export growth increased significantly. The economic policy of the first decades allowed the country to join the European Union in 2004.
Due to the crisis in the global economy, Hungary in 2008 - 2009 sufferedsignificant losses due to lower demand in the global market and contraction of domestic consumption. The country had to resort to financial assistance from the IMF and the EU.
New Economic Policy
Since 2010, the government has backed away from many market-based economic reforms and adopted a more populist approach to managing the Hungarian economy. New Prime Minister Viktor Orban has advocated greater state involvement in key sectors, through public procurement, changes in legislation and regulation.
Private pension funds were nationalized in 2011, helping to reduce public debt and the budget deficit to manageable levels (below 3% of GDP). Since pension contributions began to be collected by the state pension fund. However, public debt remained quite high compared to other Eastern European countries.
Nationalization and deprivatization
In 2014, the state bought the Budapest Bank from the American financial and industrial group GE, thus the government ensured the share of Hungarian capital in the banking sector in the amount of more than 50%. Orban considers it necessary to bring this figure to 60% in order to then sell the banks to local entrepreneurs. Which should ensure the independence of the monetary system.
The government has taken other steps to deprivatize and nationalize key industries, including the purchase of a stake in the largest Hungarian oil and gas company Mol, the buyoutE. ON Földgáz Storage and E. ON Földgáz Trade, engaged in the wholesale of natural gas and many others. Probably, if we talk briefly about the modern economy of Hungary, then this is now "goulash capitalism".
The current economy
Real GDP growth has been robust in recent years due to increased EU funding, higher demand for Hungarian goods in the European market and a recovery in domestic household consumption. In 2018, the country's economy is projected to grow by 4.3%, last year it was 3.8%. The increase was due to the pre-investment of projects funded by EU funds.
The government has launched a six-year plan to gradually increase the minimum wage and public sector wages. It is planned to reduce taxes on food products and services. Income tax will also be reduced to 15% from the current 16%.
