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Hungary vs. Ukraine

Economy

HungaryUkraine
Economy - overview

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.

After Russia, the Ukrainian Republic was the most important economic component of the former Soviet Union, producing about four times the output of the next-ranking republic. Its fertile black soil accounted for more than one fourth of Soviet agricultural output, and its farms provided substantial quantities of meat, milk, grain, and vegetables to other republics. Likewise, its diversified heavy industry supplied unique equipment such as large diameter pipes and vertical drilling apparatus, and raw materials to industrial and mining sites in other regions of the former USSR.

 

Shortly after independence in August 1991, the Ukrainian Government liberalized most prices and erected a legal framework for privatization, but widespread resistance to reform within the government and the legislature soon stalled reform efforts and led to some backtracking. Output by 1999 had fallen to less than 40% of the 1991 level. Outside institutions - particularly the IMF encouraged Ukraine to quicken the pace and scope of reforms to foster economic growth. Ukrainian Government officials eliminated most tax and customs privileges in a March 2005 budget law, bringing more economic activity out of Ukraine's large shadow economy. From 2000 until mid-2008, Ukraine's economy was buoyant despite political turmoil between the prime minister and president. The economy contracted nearly 15% in 2009, among the worst economic performances in the world. In April 2010, Ukraine negotiated a price discount on Russian gas imports in exchange for extending Russia's lease on its naval base in Crimea.

 

Ukraine's oligarch-dominated economy grew slowly from 2010 to 2013 but remained behind peers in the region and among Europe's poorest. After former President YANUKOVYCH fled the country during the Revolution of Dignity, Ukraine's economy fell into crisis because of Russia's annexation of Crimea, military conflict in the eastern part of the country, and a trade war with Russia, resulting in a 17% decline in GDP, inflation at nearly 60%, and dwindling foreign currency reserves. The international community began efforts to stabilize the Ukrainian economy, including a March 2014 IMF assistance package of $17.5 billion, of which Ukraine has received four disbursements, most recently in April 2017, bringing the total disbursed as of that date to approximately $8.4 billion. Ukraine has made progress on reforms designed to make the country prosperous, democratic, and transparent, including creation of a national anti-corruption agency, overhaul of the banking sector, establishment of a transparent VAT refund system, and increased transparency in government procurement. But more improvements are needed, including fighting corruption, developing capital markets, improving the business environment to attract foreign investment, privatizing state-owned enterprises, and land reform. The fifth tranche of the IMF program, valued at $1.9 billion, was delayed in mid-2017 due to lack of progress on outstanding reforms, including adjustment of gas tariffs to import parity levels and adoption of legislation establishing an independent anti-corruption court.

 

Russia's occupation of Crimea in March 2014 and ongoing Russian aggression in eastern Ukraine have hurt economic growth. With the loss of a major portion of Ukraine's heavy industry in Donbas and ongoing violence, the economy contracted by 6.6% in 2014 and by 9.8% in 2015, but it returned to low growth in in 2016 and 2017, reaching 2.3% and 2.0%, respectively, as key reforms took hold. Ukraine also redirected trade activity towards the EU following the implementation of a bilateral Deep and Comprehensive Free Trade Agreement, displacing Russia as its largest trading partner. A prohibition on commercial trade with separatist-controlled territories in early 2017 has not impacted Ukraine's key industrial sectors as much as expected, largely because of favorable external conditions. Ukraine returned to international debt markets in September 2017, issuing a $3 billion sovereign bond.

GDP (purchasing power parity)$321.869 billion (2019 est.)

$307.778 billion (2018 est.)

$291.995 billion (2017 est.)

note: data are in 2010 dollars
$538.388 billion (2019 est.)

$521.524 billion (2018 est.)

$504.35 billion (2017 est.)

note: data are in 2010 dollars
GDP - real growth rate4.58% (2019 est.)

5.44% (2018 est.)

4.45% (2017 est.)
3.24% (2019 est.)

3.41% (2018 est.)

2.48% (2017 est.)
GDP - per capita (PPP)$32,945 (2019 est.)

$31,485 (2018 est.)

$29,832 (2017 est.)

note: data are in 2010 dollars
$12,810 (2019 est.)

$12,338 (2018 est.)

$11,871 (2017 est.)

note: data are in 2010 dollars
GDP - composition by sectoragriculture: 3.9% (2017 est.)

industry: 31.3% (2017 est.)

services: 64.8% (2017 est.)
agriculture: 12.2% (2017 est.)

industry: 28.6% (2017 est.)

services: 60% (2017 est.)
Population below poverty line12.3% (2018 est.)1.1% (2019 est.)
Household income or consumption by percentage sharelowest 10%: 3.3%

highest 10%: 22.4% (2015)
lowest 10%: 4.2%

highest 10%: 21.6% (2015 est.)
Inflation rate (consumer prices)3.3% (2019 est.)

2.8% (2018 est.)

2.3% (2017 est.)
7.9% (2019 est.)

11% (2018 est.)

14.4% (2017 est.)

note: Excluding the temporarily occupied territories of the Autonomous Republic of Crimea, the city of Sevastopol and part of the anti-terrorist operation zone
Labor force4.414 million (2020 est.)16.033 million (2017 est.)
Labor force - by occupationagriculture: 4.9%

industry: 30.3%

services: 64.5% (2015 est.)
agriculture: 5.8%

industry: 26.5%

services: 67.8% (2014)
Unemployment rate3.45% (2019 est.)

3.71% (2018 est.)
8.89% (2019 est.)

9.42% (2018 est.)

note: officially registered workers; large number of unregistered or underemployed workers
Distribution of family income - Gini index30.6 (2017 est.)

28.6 (2014)
26.1 (2018 est.)

28.2 (2009)
Budgetrevenues: 61.98 billion (2017 est.)

expenditures: 64.7 billion (2017 est.)
revenues: 29.82 billion (2017 est.)

expenditures: 31.55 billion (2017 est.)

note: this is the planned, consolidated budget
Industriesmining, metallurgy, construction materials, processed foods, textiles, chemicals (especially pharmaceuticals), motor vehiclescoal, electric power, ferrous and nonferrous metals, machinery and transport equipment, chemicals, food processing
Industrial production growth rate7.4% (2017 est.)3.1% (2017 est.)
Agriculture - productsmaize, wheat, milk, sunflower seed, barley, rapeseed, sugar beet, apples, pork, grapesmaize, wheat, potatoes, sunflower seed, sugar beet, milk, barley, soybeans, rapeseed, tomatoes
Exports$167.99 billion (2019 est.)

$158.802 billion (2018 est.)

$151.185 billion (2017 est.)
$161.231 billion (2019 est.)

$151.075 billion (2018 est.)

$153.046 billion (2017 est.)
Exports - commoditiescars and vehicle parts, packaged medicines, spark-ignition engines, video displays, broadcasting equipment (2019)corn, sunflower seed oils, iron and iron products, wheat, insulated wiring, rapeseed (2019)
Exports - partnersGermany 27%, Romania 5%, Italy 5%, Slovakia 5% (2019)Russia 9%, China 8%, Germany 6%, Poland 6%, Italy 5%, Turkey 5% (2019)
Imports$159.63 billion (2019 est.)

$148.471 billion (2018 est.)

$138.773 billion (2017 est.)
$207.335 billion (2019 est.)

$195.071 billion (2018 est.)

$189.402 billion (2017 est.)
Imports - commoditiescars and vehicle parts, integrated circuits, packaged medicines, broadcasting equipment, crude petroleum (2019)refined petroleum, cars, packaged medicines, coal, natural gas (2019)
Imports - partnersGermany 25%, China 6%, Poland 6%, Austria 6%, Czechia 5%, Slovakia 5%, Italy 5%, Netherlands 5% (2019)China 13%, Russia 12%, Germany 10%, Poland 9%, Belarus 7% (2019)
Debt - external$123.256 billion (2019 est.)

$125.29 billion (2018 est.)
$117.41 billion (2019 est.)

$114.449 billion (2018 est.)
Exchange ratesforints (HUF) per US dollar -

295.3276 (2020 est.)

299.4939 (2019 est.)

283.5923 (2018 est.)

279.33 (2014 est.)

232.6 (2013 est.)
hryvnia (UAH) per US dollar -

28.10001 (2020 est.)

23.7 (2019 est.)

27.80499 (2018 est.)

21.8447 (2014 est.)

11.8867 (2013 est.)
Fiscal yearcalendar yearcalendar year
Public debt73.6% 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.
71% of GDP (2017 est.)

81.2% of GDP (2016 est.)

note: the total public debt of $64.5 billion consists of: domestic public debt ($23.8 billion); external public debt ($26.1 billion); and sovereign guarantees ($14.6 billion)
Reserves of foreign exchange and gold$28 billion (31 December 2017 est.)

$25.82 billion (31 December 2016 est.)
$18.81 billion (31 December 2017 est.)

$15.54 billion (31 December 2016 est.)
Current Account Balance-$392 million (2019 est.)

$510 million (2018 est.)
-$4.124 billion (2019 est.)

-$6.432 billion (2018 est.)
GDP (official exchange rate)$163.251 billion (2019 est.)$155.082 billion (2019 est.)
Credit ratingsFitch rating: BBB (2019)

Moody's rating: Baa3 (2016)

Standard & Poors rating: BBB (2019)
Fitch rating: B (2019)

Moody's rating: B3 (2020)

Standard & Poors rating: B (2019)
Ease of Doing Business Index scoresOverall score: 73.4 (2020)

Starting a Business score: 88.2 (2020)

Trading score: 100 (2020)

Enforcement score: 71 (2020)
Overall score: 70.2 (2020)

Starting a Business score: 91.1 (2020)

Trading score: 80.1 (2020)

Enforcement score: 63.6 (2020)
Taxes and other revenues44.5% (of GDP) (2017 est.)26.6% (of GDP) (2017 est.)
Budget surplus (+) or deficit (-)-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
-1.5% (of GDP) (2017 est.)
Unemployment, youth ages 15-24total: 11.4%

male: 11.9%

female: 10.6% (2019 est.)
total: 15.4%

male: 15.5%

female: 15.3% (2019 est.)
GDP - composition, by end usehousehold 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.)
household consumption: 66.5% (2017 est.)

government consumption: 20.4% (2017 est.)

investment in fixed capital: 16% (2017 est.)

investment in inventories: 4.7% (2017 est.)

exports of goods and services: 47.9% (2017 est.)

imports of goods and services: -55.6% (2017 est.)
Gross national saving27.8% of GDP (2019 est.)

26.9% of GDP (2018 est.)

24.8% of GDP (2017 est.)
12.1% of GDP (2019 est.)

15.2% of GDP (2018 est.)

17.8% of GDP (2017 est.)

Source: CIA Factbook