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Romania vs. Hungary

Economy

RomaniaHungary
Economy - overview

Romania, which joined the EU on 1 January 2007, began the transition from communism in 1989 with a largely obsolete industrial base and a pattern of output unsuited to the country's needs. Romania's macroeconomic gains have only recently started to spur creation of a middle class and to address Romania's widespread poverty. Corruption and red tape continue to permeate the business environment.

In the aftermath of the global financial crisis, Romania signed a $26 billion emergency assistance package from the IMF, the EU, and other international lenders, but GDP contracted until 2011. In March 2011, Romania and the IMF/EU/World Bank signed a 24-month precautionary standby agreement, worth $6.6 billion, to promote fiscal discipline, encourage progress on structural reforms, and strengthen financial sector stability; no funds were drawn. In September 2013, Romanian authorities and the IMF/EU agreed to a follow-on standby agreement, worth $5.4 billion, to continue with reforms. This agreement expired in September 2015, and no funds were drawn. Progress on structural reforms has been uneven, and the economy still is vulnerable to external shocks.

Economic growth rebounded in the 2013-17 period, driven by strong industrial exports, excellent agricultural harvests, and, more recently, expansionary fiscal policies in 2016-2017 that nearly quadrupled Bucharest's annual fiscal deficit, from +0.8% of GDP in 2015 to -3% of GDP in 2016 and an estimated -3.4% in 2017. Industry outperformed other sectors of the economy in 2017. Exports remained an engine of economic growth, led by trade with the EU, which accounts for roughly 70% of Romania trade. Domestic demand was the major driver, due to tax cuts and large wage increases that began last year and are set to continue in 2018.

An aging population, emigration of skilled labor, significant tax evasion, insufficient health care, and an aggressive loosening of the fiscal package compromise Romania's long-term growth and economic stability and are the economy's top vulnerabilities.

Hungary has transitioned from a centrally planned to a market-driven economy with a per capita income approximately two thirds of the EU-28 average; however, in recent years the government has become more involved in managing the economy. Budapest has implemented unorthodox economic policies to boost household consumption and has relied on EU-funded development projects to generate growth.

 

Following the fall of communism in 1990, Hungary experienced a drop-off in exports and financial assistance from the former Soviet Union. Hungary embarked on a series of economic reforms, including privatization of state-owned enterprises and reduction of social spending programs, to shift from a centrally planned to a market-driven economy, and to reorient its economy towards trade with the West. These efforts helped to spur growth, attract investment, and reduce Hungary's debt burden and fiscal deficits. Despite these reforms, living conditions for the average Hungarian initially deteriorated as inflation increased and unemployment reached double digits. Conditions slowly improved over the 1990s as the reforms came to fruition and export growth accelerated. Economic policies instituted during that decade helped position Hungary to join the European Union in 2004. Hungary has not yet joined the euro-zone. Hungary suffered a historic economic contraction as a result of the global economic slowdown in 2008-09 as export demand and domestic consumption dropped, prompting it to take an IMF-EU financial assistance package.

 

Since 2010, the government has backpedaled on many economic reforms and taken a more populist approach towards economic management. The government has favored national industries and government-linked businesses through legislation, regulation, and public procurements. In 2011 and 2014, Hungary nationalized private pension funds, which squeezed financial service providers out of the system, but also helped Hungary curb its public debt and lower its budget deficit to below 3% of GDP, as subsequent pension contributions have been channeled into the state-managed pension fund. Hungary's public debt (at 74.5% of GDP) is still high compared to EU peers in Central Europe. Real GDP growth has been robust in the past few years due to increased EU funding, higher EU demand for Hungarian exports, and a rebound in domestic household consumption. To further boost household consumption ahead of the 2018 election, the government embarked on a six-year phased increase to minimum wages and public sector salaries, decreased taxes on foodstuffs and services, cut the personal income tax from 16% to 15%, and implemented a uniform 9% business tax for small and medium-sized enterprises and large companies. Real GDP growth slowed in 2016 due to a cyclical decrease in EU funding, but increased to 3.8% in 2017 as the government pre-financed EU funded projects ahead of the 2018 election.

 

Systemic economic challenges include pervasive corruption, labor shortages driven by demographic declines and migration, widespread poverty in rural areas, vulnerabilities to changes in demand for exports, and a heavy reliance on Russian energy imports.

GDP (purchasing power parity)$579.549 billion (2019 est.)

$556.442 billion (2018 est.)

$532.611 billion (2017 est.)

note: data are in 2010 dollars
$321.869 billion (2019 est.)

$307.778 billion (2018 est.)

$291.995 billion (2017 est.)

note: data are in 2010 dollars
GDP - real growth rate4.2% (2019 est.)

4.54% (2018 est.)

7.11% (2017 est.)
4.58% (2019 est.)

5.44% (2018 est.)

4.45% (2017 est.)
GDP - per capita (PPP)$29,941 (2019 est.)

$28,576 (2018 est.)

$27,192 (2017 est.)

note: data are in 2010 dollars
$32,945 (2019 est.)

$31,485 (2018 est.)

$29,832 (2017 est.)

note: data are in 2010 dollars
GDP - composition by sectoragriculture: 4.2% (2017 est.)

industry: 33.2% (2017 est.)

services: 62.6% (2017 est.)
agriculture: 3.9% (2017 est.)

industry: 31.3% (2017 est.)

services: 64.8% (2017 est.)
Population below poverty line23.8% (2018 est.)12.3% (2018 est.)
Household income or consumption by percentage sharelowest 10%: 15.3%

highest 10%: 7.6% (2014 est.)
lowest 10%: 3.3%

highest 10%: 22.4% (2015)
Inflation rate (consumer prices)3.8% (2019 est.)

4.6% (2018 est.)

1.3% (2017 est.)
3.3% (2019 est.)

2.8% (2018 est.)

2.3% (2017 est.)
Labor force4.889 million (2020 est.)4.414 million (2020 est.)
Labor force - by occupationagriculture: 28.3%

industry: 28.9%

services: 42.8% (2014)
agriculture: 4.9%

industry: 30.3%

services: 64.5% (2015 est.)
Unemployment rate3.06% (2019 est.)

3.56% (2018 est.)
3.45% (2019 est.)

3.71% (2018 est.)
Distribution of family income - Gini index36 (2017 est.)

28.2 (2010)
30.6 (2017 est.)

28.6 (2014)
Budgetrevenues: 62.14 billion (2017 est.)

expenditures: 68.13 billion (2017 est.)
revenues: 61.98 billion (2017 est.)

expenditures: 64.7 billion (2017 est.)
Industrieselectric machinery and equipment, auto assembly, textiles and footwear, light machinery, metallurgy, chemicals, food processing, petroleum refining, mining, timber, construction materialsmining, metallurgy, construction materials, processed foods, textiles, chemicals (especially pharmaceuticals), motor vehicles
Industrial production growth rate5.5% (2017 est.)7.4% (2017 est.)
Agriculture - productsmaize, wheat, milk, sunflower seed, potatoes, barley, grapes, sugar beet, rapeseed, plums/sloesmaize, wheat, milk, sunflower seed, barley, rapeseed, sugar beet, apples, pork, grapes
Exports$114.311 billion (2019 est.)

$110.685 billion (2018 est.)

$105.188 billion (2017 est.)
$167.99 billion (2019 est.)

$158.802 billion (2018 est.)

$151.185 billion (2017 est.)
Exports - commoditiescars and vehicle parts, insulated wiring, refined petroleum, electrical control boards, seats (2019)cars and vehicle parts, packaged medicines, spark-ignition engines, video displays, broadcasting equipment (2019)
Exports - partnersGermany 22%, Italy 10%, France 7% (2019)Germany 27%, Romania 5%, Italy 5%, Slovakia 5% (2019)
Imports$136.091 billion (2019 est.)

$127.553 billion (2018 est.)

$117.292 billion (2017 est.)
$159.63 billion (2019 est.)

$148.471 billion (2018 est.)

$138.773 billion (2017 est.)
Imports - commoditiescars and vehicle parts, crude petroleum, packaged medicines, insulated wiring, broadcasting equipment (2019)cars and vehicle parts, integrated circuits, packaged medicines, broadcasting equipment, crude petroleum (2019)
Imports - partnersGermany 19%, Italy 9%, Hungary 7%, Poland 6%, China 5%, France 5% (2019)Germany 25%, China 6%, Poland 6%, Austria 6%, Czechia 5%, Slovakia 5%, Italy 5%, Netherlands 5% (2019)
Debt - external$117.829 billion (2019 est.)

$115.803 billion (2018 est.)
$123.256 billion (2019 est.)

$125.29 billion (2018 est.)
Exchange rateslei (RON) per US dollar -

4.02835 (2020 est.)

4.31655 (2019 est.)

4.0782 (2018 est.)

4.0057 (2014 est.)

3.3492 (2013 est.)
forints (HUF) per US dollar -

295.3276 (2020 est.)

299.4939 (2019 est.)

283.5923 (2018 est.)

279.33 (2014 est.)

232.6 (2013 est.)
Fiscal yearcalendar yearcalendar year
Public debt36.8% of GDP (2017 est.)

38.8% of GDP (2016 est.)

note: defined by the EU's Maastricht Treaty as consolidated general government gross debt at nominal value, outstanding at the end of the year in the following categories of government liabilities: currency and deposits, securities other than shares excluding financial derivatives, and loans; general government sector comprises the subsectors: central government, state government, local government, and social security funds
73.6% of GDP (2017 est.)

76% of GDP (2016 est.)

note: general government gross debt is defined in the Maastricht Treaty as consolidated general government gross debt at nominal value, outstanding at the end of the year in the following categories of government liabilities: currency and deposits, securities other than shares excluding financial derivatives, and national, state, and local government and social security funds.
Reserves of foreign exchange and gold$44.43 billion (31 December 2017 est.)

$40 billion (31 December 2016 est.)
$28 billion (31 December 2017 est.)

$25.82 billion (31 December 2016 est.)
Current Account Balance-$11.389 billion (2019 est.)

-$10.78 billion (2018 est.)
-$392 million (2019 est.)

$510 million (2018 est.)
GDP (official exchange rate)$249.543 billion (2019 est.)$163.251 billion (2019 est.)
Credit ratingsFitch rating: BBB- (2011)

Moody's rating: Baa3 (2006)

Standard & Poors rating: BBB- (2014)
Fitch rating: BBB (2019)

Moody's rating: Baa3 (2016)

Standard & Poors rating: BBB (2019)
Ease of Doing Business Index scoresOverall score: 73.3 (2020)

Starting a Business score: 87.7 (2020)

Trading score: 100 (2020)

Enforcement score: 72.2 (2020)
Overall score: 73.4 (2020)

Starting a Business score: 88.2 (2020)

Trading score: 100 (2020)

Enforcement score: 71 (2020)
Taxes and other revenues29.3% (of GDP) (2017 est.)44.5% (of GDP) (2017 est.)
Budget surplus (+) or deficit (-)-2.8% (of GDP) (2017 est.)-2% (of GDP) (2017 est.)

note: Hungary has been under the EU Excessive Deficit Procedure since it joined the EU in 2004; in March 2012, the EU elevated its Excessive Deficit Procedure against Hungary and proposed freezing 30% of the country's Cohesion Funds because 2011 deficit reductions were not achieved in a sustainable manner; in June 2012, the EU lifted the freeze, recognizing that steps had been taken to reduce the deficit; the Hungarian deficit increased above 3% both in 2013 and in 2014 due to sluggish growth and the government's fiscal tightening
Unemployment, youth ages 15-24total: 16.8%

male: 16.3%

female: 17.5% (2019 est.)
total: 11.4%

male: 11.9%

female: 10.6% (2019 est.)
GDP - composition, by end usehousehold consumption: 70% (2017 est.)

government consumption: 7.7% (2017 est.)

investment in fixed capital: 22.6% (2017 est.)

investment in inventories: 1.9% (2017 est.)

exports of goods and services: 41.4% (2017 est.)

imports of goods and services: -43.6% (2017 est.)
household consumption: 49.6% (2017 est.)

government consumption: 20% (2017 est.)

investment in fixed capital: 21.6% (2017 est.)

investment in inventories: 1% (2017 est.)

exports of goods and services: 90.2% (2017 est.)

imports of goods and services: -82.4% (2017 est.)
Gross national saving18.3% of GDP (2019 est.)

18.1% of GDP (2018 est.)

20.3% of GDP (2017 est.)
27.8% of GDP (2019 est.)

26.9% of GDP (2018 est.)

24.8% of GDP (2017 est.)

Source: CIA Factbook