Hungarian Economy at a Glance

After more than 40 years of communist rule, Hungary became a republic once again on 23 October 1989. This event was an integral part of the social and political transition that took place in 1989 and 1990 and saw Hungary become a democratic, market economy. Since that time there have been a number of milestones on the road to liberalisation and European integration: NATO membership (12 March 1999), the signing of the European Union Treaty of Accession in Athens on 16 April 2003 and Hungary's accession to the European Union as a full member state on 1 May 2004.

 

Hungary has seen a successful transformation from a centrally planned economy to a free, fast-growing market economy in the past 15 years.   A successful privatization process has now been completed in most sectors, bringing foreign strategic investors as well as know-how, technology and best international practice into the country. As a result, the private sector accounts for over 80% of GDP today.   Since joining the EU in May 2004 Hungary continues to achieve strong economic growth with real GDP growth expected to be 4% in 2006. Inflation expectations remain low evidenced by a rate of 3.5% in 2005. In terms of currency stability, the Hungarian forint appreciated by nearly 7% against the euro last year as investors were attracted by Hungary's higher relative interest rates.

 

While much of Europe struggles with high unemployment rates, Hungary has a comparatively low unemployment rate of 6.1%.

Hungary's domestic industry represents one of the fastest growing in the European Union.

Investment volume grows much faster than the gross domestic product and household consumption. Two-thirds of total investments were realized by three big investment sectors, namely the processing industry (15%), forwarding, post and telecommunications (15%), and real estate and business services (13%).

 

 

 

Foreign Direct Investment

In the initial years of transformation, Hungary had the highest level of FDI in absolute terms in the region. With inflows ebbing in recent years, it has lost this top position to Poland. However, in relation to population or economic output, Hungary is still far ahead of Poland reaching EUR 48 billion by the end of 2005, and ranks second only to the Czech Republic.

Germany is the most important investor in Hungary accounting for over 30% of all foreign direct investment. About three-quarters of foreign capital come from the member states of the European Union, with Germany heading the list far ahead of the Netherlands and Austria.