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Hungary Economy
 
 
 
 
 

Hungary held its first multi-party elections in 1990, following four decades of Communist rule, and has succeeded in transforming its centrally planned economy into a market economy. Both foreign ownership of and foreign investment in Hungarian firms are widespread. The governing coalition, comprising the Hungarian Socialist Party and the liberal Alliance of Free Democrats, prevailed in the April 2006 general election. Hungary needs to reduce government spending and further reform its economy in order to meet the 2012-2013 target date for accession to the euro zone.

Hungary has continued to demonstrate economic growth as one of the newest member countries of the European Union (since 2004). The private sector accounts for over 80% of GDP. Hungary gets nearly one third of all foreign direct investment flowing into Central Europe, with cumulative foreign direct investment totalling more than $185 billion since 1989. It enjoys strong trade, fiscal, monetary, investment, business and labour freedoms. The top income tax rate is fairly high, but corporate taxes are low. Inflation is low, it was on the rise in the past few years, but it is now starting to regulate. Investment in Hungary is easy, although it is subject to government licensing in security-sensitive areas. Foreign capital enjoys virtually the same protections and privileges as domestic capital. The rule of law is strong, a professional judiciary protects property rights, and the level of corruption is low.

The Hungarian economy is a medium-sized, structurally, politically, and institutionally open economy in Central Europe and is part of the EU single market. Like most Eastern European economies, it experienced market liberalisation in the early 1990s as part of a transition away from communism. Today, Hungary is a full member of OECD and the World Trade Organisation. OECD was the first international organisation to accept Hungary as a full member in 1996, after six years of successful cooperation.

Agriculture accounted for 4.3% of GDP in 2008 and along with the food industry occupied roughly 7.7% of the labour 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 climate 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 33,000 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.

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 modernisation. The leading industry is machinery, followed by chemical industry (plastic production, pharmaceuticals), while mining, metallurgy 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%.

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 geo-strategic 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.

Tourism employs nearly 150 thousand people and the total income from tourism was €4 billion 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.

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