Economy of Hungary

Theeconomy of Hungaryis adeveloping,high-incomemixed economythat is the53rd-largest economy in the world(out of 188 countries measured byIMF) with $265.037 billion annual output,and ranks41st in the world in terms of GDP per capitameasured bypurchasing power parity.Hungaryhas avery high human development indexand a skilledlabour force, with the22nd lowest income inequality by Gini indexin the world. Hungary has an export-orientedmarket economywith a heavy emphasis onforeign trade; thus the country is the35th largest export economyin the world. The country had more than $100 billion of exports in 2015, with a hightrade surplusof $9.003 billion, of which 79% went to theEuropean Union(EU) and 21% was extra-EU trade.Hungary's productive capacity is more than 80%privately owned, with39.1% overall taxation, which funds the country'swelfare economy.On the expenditure side,household consumptionis the main component ofGDPand accounts for 50% of its total, followed by gross fixedcapital formationwith 22% andgovernment expenditurewith 20%.
In 2015 Hungary attracted $119.8 billion inFDIand invested more than $50 billion abroad.As of 2015, the key trading partners of Hungary were Germany, Austria, Romania, Slovakia, France, Italy, Poland and the Czech Republic.Major industries include food processing, pharmaceuticals, motor vehicles, information technology, chemicals, metallurgy, machinery, electrical goods, and tourism (in 2014 Hungary received 12.1 million international tourists).Hungary is the largest electronics producer inCentral and Eastern Europe.Electronicsmanufacturing and research are among the main drivers ofinnovationand economic growth in the country. In the past 20 years Hungary has also grown into a major center formobile technology,information security, and related hardware research.Theemployment ratein the economy was 68.7% in January 2017,while the employment structure shows the characteristics ofpost-industrial economies. An estimated 63.2% of the employed workforce work in the service sector, industry contributed by 29.7%, while agriculture employed 7.1%. The unemployment rate was 3.8% in September–November 2017,down from 11% during theGreat Recession. Hungary is part of theEuropean single market, which represents more than 448 million consumers. Several domestic commercial policies are determined by agreements among European Union members and by EU legislation.
LargeHungarian companiesare included in theBUX, the Hungarian stock market index listed onBudapest Stock Exchange. Well-known companies includeGraphisoft,Magyar Telekom,MKB Bank,MOL Group,Opus Global,OTP Bank,RÁBA Automotive Group,Gedeon RichterandZwack Unicum. Hungary also has a large number of specialisedsmall and medium enterprises, for example many automotive industry suppliers and technologystart ups.
Budapestis the financial and business capital of Hungary. The capital is a significant economic hub, classified as an Alpha-world cityin the study by theGlobalization and World Cities Research Networkand it is the second fastest-developingurban economyin Europe. The per capita GDP in the city increased by 2.4% and employment by 4.7% compared to the previous year, 2014.On the national level, Budapest is theprimary cityof Hungary for business, accounting for 39% of the national income. The city had agross metropolitan productof more than $100 billion in 2015, making it one of the largest regional economies in theEuropean Union.Budapest is also among the top 100 GDP performing cities in the world, as measured byPricewaterhouseCoopers. In a global city competitiveness ranking by theEconomist Intelligence Unit, Budapest is ranked aboveTel Aviv,Lisbon,MoscowandJohannesburg, among others.
Hungary maintains its own currency, theHungarian forint(HUF), although the economy fulfills theMaastricht criteriawith the exception of public debt. The ratio of public debt to GDP issignificantly below the EU averageat 66.4% in 2019. TheHungarian National Bankwas founded in 1924, after the dissolution of theAustro-Hungarian Empire. It is currently focusing on price stability, with an inflation target of 3%.
In the age offeudalismthe key economic factor was land. The new economic and social orders created private ownership of land. There are three forms of existence: the royal, ecclesiastical and secular private estate. The royal estate of theÁrpád dynastyhad evolved from the tribal lands.
The origin of the secular private holdings dates back to the conquest tribal common estates, which are increasingly in charge of the society and grows over private ownership of the becoming leaders.
However, from the founding of the state the royal gift also entered the multiplying factors secular private property line. This organization developed a feudal estate, which had two elements: the ancient estate and the possessions which were awarded bySaint Stephen I, and then the royal donations.Béla IIIwas the wealthiest European monarch of his time, according toa list of his revenues, but the reliability of the list is questioned. Over the holder unrestricted right granted by the latter lineal heir almost returned to the king. In the Order of the laws changed in 1351, which abolished the nobility's possessions for free disposal. It forbidden the nobility to sale their inherited land.
TheCarpathian Basinwas more suitable for agriculture than large livestock grazing, and therefore increased steadily in the former weight. In the 11th and 12th centuries natural farming and soil changer tillage systems met: grazing the animals, and they used the fertilized land until depletion. The most important tools for the agriculture were the plow and the ox.
The Hungarian economy prior toWorld War IIwas primarily oriented toward agriculture and small-scale manufacturing. Hungary's strategic position inEuropeand its relative high lack of natural resources also have dictated a traditional reliance on foreign trade. For instance, its largest car manufacturer,Magomobil(maker of theMagosix), produced a total of a few thousand units.In the early 1920s the textile industry began to expand rapidly, by 1928 it became the most important industry in the foreign trade of Hungary exporting textile goods worth more than 60 million pengős in that year. Companies likeMÁVAGexported locomotives toIndiaandSouth-America, itslocomotive no. 601was the largest and most powerful inEuropeat the time.
From the late 1940s, theCommunistgovernment started to nationalize the industry. At first, only factories with more than 100 workers were nationalized; later, this limit was reduced to only 10. In the agriculture, the government started a successful program ofcollectivization. From the early 1950s, more and more new factories were built. This rapid and forced industrialization followed the standardStalinistpattern in an effort to encourage a more self-sufficient economy. Most economic activity was conducted by state-owned enterprises or cooperatives and state farms. In 1968,Stalinistself-sufficiency was replaced by the "New Economic Mechanism", which reopened Hungary to foreign trade, gave limited freedom to the workings of the market, and allowed a limited number of small businesses to operate in the services sector.
Although Hungary enjoyed one of the most liberal and economically advanced economies of the formerEastern Bloc, both agriculture and industry began to suffer from a lack of investment in the 1970s, and Hungary's net foreign debt rose significantly—from $1 billion in 1973 to $15 billion in 1993—due largely to consumer subsidies and unprofitable state enterprises. In the face of economic stagnation, Hungary opted to liberalize further by passing a joint venture law, instating an income tax, and joining theInternational Monetary Fund(IMF) and theWorld Bank. By 1988, Hungary had developed atwo-tier banking system, and had enacted significant corporate legislation that paved the way for the ambitious market-oriented reforms of the post-communist years.
After the fall of communism, the former Eastern Bloc had to transition from a one-party, centrallyplanned economyto a market economy with amulti-party political system. With thecollapse of the Soviet Union, the Eastern Bloc countries suffered a significant loss in both markets for goods, and subsidizing from the Soviet Union.Hungary, for example, "lost nearly 70% of its export markets in Eastern and Central Europe." The loss of external markets in Hungary left "800,000 unemployed people because all the unprofitable and unsalvageable factories had been closed."Another form of Soviet subsidizing that greatly affected Hungary after the fall of communism was the loss of social welfare programs. Because of the lack of subsidies and a need to reduce expenditures, many social programs in Hungary had to be cut in an attempt to lower spending. As a result, many people in Hungary suffered incredible hardships during the transition to a market economy. Followingprivatizationand tax reductions on Hungarian businesses, unemployment suddenly rose to 12% in 1991 (it was 1.7% in 1990 ), gradually decreasing until 2001. Economic growth, after a fall in 1991 to −11.9%, gradually grew until the end of the 1990s at an average annual rate of 4.2%. With the stabilization of the new market economy Hungary experienced growth inforeign investment,with a "cumulative foreign direct investment totaling more than $60 billion since 1989."
TheAntallgovernment of 1990–94 began market reforms with price and trade liberation measures, a revamped tax system, and a nascent market-based banking system. By 1994, however, the costs of government overspending and hesitant privatization had become clearly visible. Cuts in consumer subsidies led to increases in the price of food, medicine, transportation services, and energy. Reduced exports to the former Soviet bloc and shrinking industrial output contributed to a sharp decline in GDP. Unemployment rose rapidly to about 12% in 1993. The external debt burden, one of the highest in Europe, reached 250% of annual export earnings, while the budget and current account deficits approached 10% of GDP. Thedevaluationof the currency (in order to support exports), without effective stabilization measures, such asindexationof wages, provoked an extremely high inflation rate, that in 1991 reached 35% and slightly decreased until 1994, growing again in 1995. In March 1995, the government of Prime MinisterGyula Hornimplemented an austerity program, coupled with aggressive privatization of state-owned enterprises and an export-promoting exchange raw regime, to reduce indebtedness, cut the current account deficit, and shrink public spending. By the end of 1997 the consolidated public sector deficit decreased to 4.6% of GDP—with public sector spending falling from 62% of GDP to below 50%—the current account deficit was reduced to 2% of GDP, and government debt was paid down to 94% of annual export earnings.
The Government of Hungary no longer requires IMF financial assistance and has repaid all of its debt to the fund. Consequently, Hungary enjoys favorable borrowing terms. Hungary's sovereign foreign currency debt issuance carries investment-grade ratings from all major credit-rating agencies, although recently the country was downgraded by Moody's, S&P and remains on negative outlook at Fitch. In 1995 Hungary's currency, the Forint (HUF), became convertible for all current account transactions, and subsequent toOECDmembership in 1996, for almost all capital account transactions as well. Since 1995, Hungary has pegged the forint against a basket of currencies (in which the U.S. dollar is 30%), and the central rate against the basket is devalued at a preannounced rate, originally set at 0.8% per month, the Forint is now an entirely free-floating currency. The government privatization program ended on schedule in 1998: 80% of GDP is now produced by the private sector,and foreign owners control 70% of financial institutions, 66% of industry, 90% of telecommunications, and 50% of the trading sector.
After Hungary's GDP declined about 18% from 1990 to 1993 and grew only 1%–1.5% up to 1996, strongexport performancepropelled GDP growth to 4.4% in 1997, with other macroeconomic indicators similarly improving. These successes allowed the government to concentrate in 1996 and 1997 on major structural reforms such as the implementation of a fully funded pension system (partly modelled afterChile's pension systemwith major modifications), reform of higher education, and the creation of a national treasury. Remaining economic challenges include reducing fiscal deficits and inflation, maintaining stable external balances, and completing structural reforms of the tax system, health care, and local government financing. Recently, the overriding goal of Hungarian economic policy has been to prepare the country for entry into the European Union, which it joined in late 2004.
Prior to the change of regime in 1989, 65% of Hungary's trade was withComeconcountries. By the end of 1997, Hungary had shifted much of its trade to the West. Trade with EU countries now comprises 80% of the total.Germany is Hungary's single most important trading partner. The US has become Hungary's sixth-largest export market, while Hungary is ranked as the 72nd largest export market for the U.S. Bilateral trade between the two countries increased 46% in 1997 to more than $1 billion. The U.S. has extended to Hungary most-favored-nation status, the Generalized System of Preferences, Overseas Private Investment Corporation insurance, and access to theExport-Import Bank.
With about $18 billion in foreign direct investment (FDI) since 1989, Hungary has attracted over one-third of all FDI in central and eastern Europe, including the former Soviet Union. Of this, about $6 billion came from American companies. Foreign capital is attracted by skilled and relatively inexpensive labor, tax incentives, modern infrastructure, and a good telecommunications system.
By 2006 Hungary's economic outlook had deteriorated. Wage growth had kept up with other nations in the region; however, this growth has largely been driven by increased government spending. This resulted in the budget deficit ballooning to over 10% of GDP and inflation rates predicted to exceed 6%.Nouriel Roubini, an economist in the Clinton administration, said that "Hungary is an accident waiting to happen."
In January 1990, the State Privatization Agency (SPA,Állami Vagyonügynökség) was established to manage the first steps ofprivatization. Because of Hungary's $21.2 billionforeign debt, the government decided to sell state property instead of distributing it to the people for free.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-rightHungarian Democratic Forumgovernment of 1990–1994 decided to abolish agricultural co-operatives by splitting them up and giving machinery and land to their former members.The government also introduced a Recompensation Law which offered vouchers to people who had owned land before it was nationalized in 1948. These people (or their descendants) could exchange their vouchers for land previously owned by agricultural co-operatives, 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,greenfield investmentsby foreign retail companies likeTesco,CoraandIKEAhad a much bigger economic impact.Many public utilities, including the national telecommunications companyMatáv, the national oil and gas conglomerateMOL Group, and electricity supply and production companyMVM Groupwere privatized as well.
Though most banks were sold to foreign investors, the largest bank,National Savings Bank (OTP), remained Hungarian-owned. 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 theBudapest Stock Exchange.
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 deficitand budget gap, and it could not reach an agreement with theIMF, either.After not having aminister of financefor more than a month, prime ministerGyula HornappointedLajos Bokrosas Finance Minister on 1 March 1995. He introduced a string of austerity measures (the "Bokros Package") on 12 March 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 MinisterFerenc Gyurcsánywas reelected on a platform promising economic "reform without austerity".
However, after the elections in April 2006, the Socialist coalition under Gyurcsány 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.
Declining exports, reduced domestic consumption and fixed asset accumulation affected Hungary during theGreat Recession, making the country enter a severe recession of −6.4%, one of the worst economic contractions in its history.
On 27 October 2008, Hungary reached an agreement with theIMFandEUfor 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 are worth a lot more in forints than they were 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".After the election in 2010 of the newFidesz-party government of Prime MinisterViktor Orbán, Hungarian banks were forced to allow the conversion of foreign-currency mortgages to the forint.The new government also nationalized $13 billion of private pension-fund assets, which could then be used to support the government debt position.
The economy showed signs of recovery in 2011 with decreasing tax rates and a moderate 1.7 percent GDP growth.
From November 2011 to January 2012, all three majorcredit rating agenciesdowngraded Hungarian debt to a non-investment speculative grade, commonly called "junk status".In part this is because of political changes creating doubts about the independence of theHungarian National Bank.
European Commission PresidentJosé Manuel Barrosowrote to Prime MinisterViktor Orbánstating that new central bank regulations, allowing political intervention, "seriously harm" Hungary's interests, postponing talks on a financial aid package. Orbán responded "If we don't reach an agreement, we'll still stand on our own feet."
TheEuropean Commissionlaunched legal proceedings against Hungary on 17 January 2012. The procedures concern Hungary'scentral bank law, the retirement age for judges and prosecutors and the independence of the data protection office, respectively.One day later Orbán indicated in a letter his willingness to find solutions to the problems raised in the infringement proceedings.On 18 January he participated in plenary session of theEuropean Parliamentwhich also dealt with the Hungarian case. He said "Hungary has been renewed and reorganised under European principles". He also said that the problems raised by the European Union can be resolved "easily, simply and very quickly". He added that none of the EC's objections affected Hungary's new constitution.
Following the mild recession of 2012, the GDP picked up again from 2014, and based on the commission's Winter 2015 forecast it was projected to have accelerated to 3.3%. The more dynamic economic performance attributed to a moderately growing domestic demand and supported the growth of gross fixed capital formation. The surge (3.8% in the first half of 2014), however was only achieved via temporary measures and factors, such as the stepped-up absorption of EU-funds and the central bank's Funding for Growth Scheme, which subsidised loans for small-and medium-sized enterprises.The fundaments of growth didn't considerably change in 2015 as well – the government supported EU-fund transfers along with the moderately successful central bank loans of economic revitalization – fueled the fair GDP growth.
The Hungarian GDP, GDP per capita, living standards and wages have been steadily rising until the start of the COVID-19 pandemic, when just like the rest of Europe, the stats above tanked. GDP fell to $155 Billion, GDP PPP has fallen to $322 Billion, GDP per capita to $15,855, inflation slightly rose to 4.54%.
National debt rose considerably, to around 80% Debt-to-GDP from the previous 60–65%.
The country was hard hit, unemployment was also higher than average until 2021 when after the lockdowns have stopped. The GDP, GDP per capita, GDP PPP, unemployment and national debt have all recovered to and beyond their pre-covid values.On the other hand,inflationhas risen to the record levels, reaching 24.5% in December 2022, being the highest in Europe.
Hungary's total land area is 93,030 kmalong with 690 kmof 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 theGreat Hungarian Plainand theLittle 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 theNorth Hungarianand theTransdanubian Mountains, and theAlpokalja. 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 °C.90% of Hungary's drinking water is mostly retrieved from such sources.
The major rivers of Hungary are theDanubeand theTisza. The Danube also flows through parts ofGermany,Austria,Slovakia,Serbia, andRomania. 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 km. 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 includeLake Velence(26 km) in Fejér County andLake Fertő(82 kmwithin Hungary).
The waters of the country are in danger, since more water is going out of the county than in. In 2022, a severe drought which has impacted all of Europe is endangering among others, Lake Velence, Lake Balaton, the Danube and Tisza rivers. The flow of the aforementioned rivers have been modified in the late 19th century, and while it prevented larger floods and helped water transport, it has its downsides, such as the inability to support large-scale watering of crops, worsening the drought of 2022. Large-scale reforms and rebuilding of the Alföld water system is needed, but no such plans are being announced by the government as of 2022.
Hungary has 31,058 km of roads andmotorwaysof 1,118 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 theAustrian,Slovakian,Slovenian,Croatian,RomanianandSerbianborders via motorways.
Due to its location and geographical features, several transport corridors cross Hungary.Pan-European corridorsno. IV, V, andX, and European routes no.E60,E71,E73,E75, andE77go through Hungary. Thanks to its radial road system, all of these routes touchBudapest.
There are five international, four domestic, four military and several non-publicairports in Hungary. The largest airport is theBudapest 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 7,685 km long, 2,791 km of it electrified.
Electricity is available in every settlement in Hungary.
Piped gasis available in 2873 settlements, 91.1% of all of them.To avoid gas shortages due toUkrainianpipeline shutdowns like the one in January 2009,Hungary participates both in theNabuccoand theSouth Streamgas 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 developwater suppliesorsewage 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".
In 2022, the sector with the highest number of companies registered in Hungary is Services with 273,851 companies followed by Finance, Insurance, and Real Estate and Retail Trade with 113,153 and 87,237 companies respectively.
Agriculture accounted for 4.3% of GDP in 2008and 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 favorable conditions includingcontinental climateand theplainsthat 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 hasseveral wine regionsproducing among others the worldwide famous white dessert wineTokajiand the redBull's Blood. Another traditional world-famous alcoholic drink is the fruit brandypálinka.
Mainly cattle, pigs, poultry and sheep are raised in the country. The livestock includes theHungarian Grey Cattlewhich is a major tourist attraction in theHortobágy National Park. An important component of the country's gastronomic heritage isfoie graswith about 33,000 farmers engaged in the industry. Hungary is the second largest world producer and the biggest exporter of foie gras (exporting mainly toFrance).
Another symbol of Hungarian agriculture and cuisine is thepaprika(both sweet and hot types). The country is one of the leading paprika producers of the world withSzegedandKalocsabeing the centres of production.
Hungary produced, in 2018, 7.9 million tons ofmaize(15th largest producer in the world); 5.2 million tons ofwheat; 1.8 million tons ofsunflower seed(8th largest producer in the world); 1.1 million tons ofbarley; 1 million tons ofrapeseed(14th largest producer in the world); 941 thousand tons ofsugar beet, which is used to producesugarandethanol; 674 thousand tons ofapple; 539 thousand tons ofgrape; 330 thousand tons ofpotato; 330 thousand tons oftriticale; in addition to smaller productions of other agricultural products.
Hungary has a tax-fundeduniversal health caresystem, organized by the state-owned National Healthcare Fund (Hungarian:Országos Egészségbiztosítási Pénztár (OEP)). Health insurance is not directly paid for by children, mothers or fathers with baby, students,pensioners,people with socially poor background,handicapped people(including physical and mental disorders),priestsand other church employees.Health in Hungary can be described with a rapidly growinglife expectancyand a very lowinfant mortality rate(4.9 per 1,000live birthsin 2012).Hungary spent 7.4% of the GDP on health care in 2009 (it was 7.0% in 2000), lower than the average of theOECD. Total health expenditure was 1,511 US$ per capita in 2009, 1,053 US$ governmental-fund (69.7%) and 458 US$ private-fund (30.3%)but has now risen to 2047 US$ per capita (as per 2018 data), roughly a 33% increase total, with the government funding 1439 US$ (70.3%) of the total versus the private funding 608 US$ (29.7%).This amount totals to 6.6% of the country's total GDP, roughly a percent decrease overall.
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,metallurgyand textile industry seemed to be losing importance in the past two decades. In spite of the significant drop in the last decade, Hungary's 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 thenuclear power station of Paksaccounts for 53,6%.
Hungary is a favoured destination of foreign investors of automotive industry resulting in the presence ofGeneral Motors(Szentgotthárd),Magyar Suzuki(Esztergom),Mercedes-Benz(Kecskemét),BMW(Debrecen),BYD(Szeged), andAudifactory (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) inGyőr, becoming Hungary's largest exporter with total investments reaching over €3,300 million until 2007.Audi's workforce assembles theAudi TT, the Audi TT Roadster and theA3 Cabrioletin Hungary.The plant delivers engines to carmakersVolkswagen,Skoda,SEAT, and also toLamborghini.
Daimler-Benzinvests €800 million ($1.2 billion) and creates up to 2,500 jobs at a new assembly plant inKecskemét, Hungary,with capacity for producing 100,000 Mercedes-Benz compact cars a year.
Opelproduced 80,000Astraand 4,000Vectracars from March 1992 until 1998 inSzentgotthárd, Hungary.Today, the plant produces about half million engines and cylinder heads a year.
In 2018, BMW announced that it will build a car factory nearDebrecen, which will produce around 150.000 cars per year.
In 2021, BYD announced its plan to build a car factory nearSzegedas its first European factory.
Battery production
Hungary is rapidly becoming a significant player in the battery production industry. The country has attracted substantial investments, including a new gigafactory by the Chinese company Contemporary Amperex Technology Co. Limited (CATL) in Debrecen. This factory is expected to produce 100 gigawatt hours (GWh) of battery capacity annually by the end of the decade, enough to equip a million electric vehicles.
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 employs nearly 150 thousand people and the total income from tourism was 4 billion euros in 2008.One of Hungary's top tourist destinations isLake Balaton, the largest freshwater lake in Central Europe, with a number of 1.2 million visitors in 2008. The most visited region isBudapest, the Hungarian capital attracted 3.61 million visitors in 2008.
Hungary was the world's 24th most visited country in 2011.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, since these have not been in circulation since 1999, they are only used in accounting.
There are sixcoins(5, 10, 20, 50, 100, 200)and sixbanknotes(500, 1000, 2000, 5000, 10,000 and 20,000).The 1 and 2 Forint coins were withdrawn in 2008, yet prices remained the same as stores follow the official rounding schemefor the final price. The 200 Forint note was withdrawn on 16 November 2009.
Current EU member states that have not yet adopted the Euro, candidates andofficial potential candidates.No more than 1.5% higher than the 3 best-performing EU member states.No more than 2% higher than the 3 best-performingEUmember states.Formal obligation for Euro adoption in the country EUTreaty of Accessionor the Framework for membership negotiations.Values from May 2008 report.To be updated each year.
Education in Hungaryis free and compulsory from the age of 5 to 16.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 thebologna 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 has one of the highest levels of citizenemigrationinside the EU,particularly amongyoung people. Of those immigrating 44% are under 30 and 77% are under 40. Most who leave the country and migrate towesternorcentral Europe.Current immigration is exceedingly high, with 239,924 Hungarians immigrating abroad since 2010,peaking in 2015. Young women tend to be one of the main groups emigrating.The increase in immigration coincides with theFidesz partycoming to power in 2010.Common destination countries includeGermany,Austria, and theUnited Kingdom.
Common reasons for immigrating include lowwageswhen compared to the rest of the EU.According to theHungarian Central Statistical Officethe number of Hungarian students enrolled inuniversitydecreased by 25% from 2003 to 2013, roughly a third of those immigrating are college graduates leading tobrain drain.Compounding this is that theHungarian Forinttends to be less stable then theEuroand often suffers from high levels of inflation.Other than economic reasons, familial, social, and educational factors also contribute.The high rate of immigration coupled with low birth rates (1.59births per woman) results in Hungary's aging and decreasingpopulation.
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'sGini coefficientof 0.269ranks 11th in the world.The graph on the right shows that Hungary is close in equality to the world-leaderDenmark. The highest 10% of the population gets 22.2% of the incomes.According to the business magazineNapi Gazdaság, the owner of the biggest fortune, 300 billion HUF, isSándor 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 theHuman Development Report, the country'sHPI-1value is 2.2% (3rd among 135 countries),and itsHDIvalue 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'sGDI (gender-related development index)value of 0.879is 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%.
Ethnic inequality, which strikes primarilyRoma 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 thefall of Communism:due to the tremendous layoffs of unskilled workersduring 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 reinforcessegregationand unemployment.
Twenty years after the change of the regime,corruptionremains a severe issue in Hungary.According toTransparency InternationalHungary, 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 thehealthcare systemin 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 obstetrician 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' timerequired to start a new business ranks 29th, and the country is 122nd concerning the ease of paying taxes.
In accordance with the theory of theseparation 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.
The Hungarian organization responsible for controlling the country's monetary policy is theHungarian National Bank(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 theEuropean 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, thefloating exchange ratesystem 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 theBritish pound(GBP),euro(EUR),Swiss franc(CHF), and theU.S. dollar(USD) from June 2008 to September 2009. It indicates that a relatively strong forint weakened during theGreat Recession, and that its value increased afterwards.
Compared to the euro the forint was at peak on 18 June 2008 when 1000 Ft was €4.36 and €1 was 229.11Ft. The forint was worth the least on 6 March 2009; this day 1000 Ft was €3.16 and €1 was 316Ft).
Compared to USD, most expensive/cheapest dates are 22 June 2008 and 6 March 2009 with 1000HUF/USD rates 6.94 and 4.01 respectively.
On 24 March 2015 the Euro was at 299.1450 and USD was at 274.1650,
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 associalist economictradition as well as cultural characteristics that endorse paternalist behaviour on the state's part, meaning that people have a habitual reflex that make them call for state subsidies.Some economistsdispute 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 theEurozoneas well. Therefore, theMaastricht criteriawhich forms the condition 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 anESA95figure, 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 2000sreaching a negative peak 8.5% in 2008.
In Hungary, the 1988 reform of taxes introduced a comprehensive tax system which mainly consists of central and local taxes, including apersonal income tax, acorporate income taxand avalue added tax.Among the total tax income the ratio of local taxes is solely 5% while the EU average is 30%.Until 2010, the taxation of an individual was progressive, determining the tax rate based on the individual's income: with earning up to 1,900,000 forints a year, the tax was 18%, the tax on incomes above this limit was 36% since 1 July 2009.
Based on the new one-rate tax regime introduced January 2011, the overall tax rate for all income-earnings bands has been 16%. According to the income-tax returns of 2008, 14,6% of taxpayers was charged for 64,5% of the total tax burdens.Before the new corporate income tax regime, the corporate tax was 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. From January 2011, under the new corporate income tax regime the tax rate was divided into two parts (i) corporations having income before tax below 500 million HUF (appr. USD 2.5 million) was lowered to 10% and (ii) 16% remained for all other companies until 2013. After this, the unified corporate income tax rate will be 10%, irrespectively from the size of the net income before tax. In January 2017, corporate tax was unified at a rate of 9% – the lowest in the European Union. The rate of value added tax in Hungary is 27%, the highest in Europe, since 1 January 2012.
The following table shows the main economic indicators in 1980–2021. Inflation under 2% is in green.
Households with access to fixed and mobile telephonyQuick facts – Telecommunication market in Hungary – Hungarian Statistical office (3Q 2011)
Broadband penetration rate
Individuals using computer and internet
Hungary joined the European Union on 05/01/2004 after a successful referendumamong theEU-10. 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.
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.