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Hungary
Country Information
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Country:
Hungary
Capital:
Budapest
Currency:
Forint (HUF)

Population: 9,930,915
Government Type: Parliamentary Democracy
Riedel Research Coverage by Region

Background

Hungary became a Christian kingdom in A.D. 1000 and for many centuries served as a bulwark against Ottoman Turkish expansion in Europe. The kingdom eventually became part of the polyglot Austro-Hungarian Empire, which collapsed during World War I. The country fell under Communist rule following World War II. In 1956, a revolt and an announced withdrawal from the Warsaw Pact were met with a massive military intervention by Moscow. Under the leadership of Janos KADAR in 1968, Hungary began liberalizing its economy, introducing so-called "Goulash Communism." Hungary held its first multiparty elections in 1990 and initiated a free market economy. It joined NATO in 1999 and the EU in 2004.

Economy

Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-25 average. The private sector accounts for more than 80% of GDP. Foreign ownership of and investment in Hungarian firms are widespread, with cumulative foreign direct investment totaling more than $60 billion since 1989. Hungary issues investment-grade sovereign debt. International observers, however, have expressed concerns over Hungary's fiscal and current account deficits. In 2007, Hungary eliminated a trade deficit that had persisted for several years. Inflation declined from 14% in 1998 to a low of 3.7% in 2006, but jumped to 7.8% in 2007. Unemployment has persisted above 6%. Hungary's labor force participation rate of 57% is one of the lowest in the Organization for Economic Cooperation and Development (OECD). Germany is by far Hungary's largest economic partner. Policy challenges include cutting the public sector deficit to 4% of GDP by 2008, from about 6% in 2007. The government's austerity program of tax hikes and subsidy cuts has reduced Hungary's large budget deficit, but the reforms have dampened domestic consumption, slowing GDP growth to about 2% in 2007. The government will need to pass additional reforms to ensure the long-term stability of public finances. The government plans to eventually lower its public sector deficit to below 3% of GDP to adopt the euro.

Links

Source: Central Intelligence Agency
The World Factbook