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Hungary Economy Profile 2018

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Economy - overviewHungary 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.

The economy is largely driven by exports, making it vulnerable to external market shocks. 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. However, 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 yet to join the euro-zone, however. 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 reforms and taken a more nationalist and populist approach towards economic management. The government has favored national industries, and specifically government-linked businesses, through legislation, regulation, and public procurements. In 2010 and 2012, the government increased taxes on foreign-dominated sectors, such as banking and retail, because the move helped to raise revenues and decrease the budget deficit, thereby allowing Hungary to maintain access to EU development funds. The policy deterred private investment, however. In 2011 and 2014, Hungary nationalized private pension funds. The move squeezed financial service providers out of the system, but it 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 73.9% of GDP) is still high compared to EU peers in Central Europe. Despite these reversals, real GDP growth has remained robust in the past several years because EU funding increased, EU demand for Hungarian exports rose, and domestic household consumption rebounded. To further boost household consumption ahead of an anticipated 2018 election, the government has announced plans to increase the minimum wage and public sector salaries, decrease taxes on foodstuffs and services, cut the personal income tax from 16% to 15%, and introduce 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, in part as Budapest front-loaded drawdowns of EU funds ahead of the planned 2018 election.

Systemic economic challenges include pervasive corruption, long-term and youth unemployment, skilled labor shortages, widespread poverty in rural areas, vulnerabilities to changes in demand for exports, and a heavy reliance on Russian energy imports.
GDP (purchasing power parity)$283.6 billion (2017 est.)
$274.8 billion (2016 est.)
$269.5 billion (2015 est.)
note: data are in 2017 dollars
GDP (official exchange rate)$132 billion (2016 est.)
GDP - real growth rate3.2% (2017 est.)
2% (2016 est.)
3.1% (2015 est.)
GDP - per capita (PPP)$28,900 (2017 est.)
$28,000 (2016 est.)
$27,300 (2015 est.)
note: data are in 2017 dollars
Gross national saving24.4% of GDP (2017 est.)
24.5% of GDP (2016 est.)
25.1% of GDP (2015 est.)
GDP - composition, by end usehousehold consumption: 52.3%
government consumption: 19.9%
investment in fixed capital: 19%
investment in inventories: -1.2%
exports of goods and services: 94.1%
imports of goods and services: -84.1% (2017 est.)
GDP - composition by sectoragriculture: 4.4%
industry: 30.9%
services: 64.7% (2017 est.)
Population below poverty line14.9% (2015 est.)
Labor force4.599 million (2017 est.)
Labor force - by occupationagriculture: 4.9%
industry: 30.3%
services: 64.5% (2015 est.)
Unemployment rate4.4% (2017 est.)
5.1% (2016 est.)
Unemployment, youth ages 15-24total: 17.3%
male: 18.3%
female: 16% (2015 est.)
Household income or consumption by percentage sharelowest 10%: 3.3%
highest 10%: 22.4% (2015)
Distribution of family income - Gini index28.2 (2015 est.)
28.6 (2014)
Budgetrevenues: $63.63 billion
expenditures: $66.96 billion (2017 est.)
Taxes and other revenues48.2% of GDP (2017 est.)
Budget surplus (+) or deficit (-)-2.5% of GDP
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 (2017 est.)
Public debt73.9% of GDP (2017 est.)
74.1% 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 government, state government, local government, and social security funds.
Inflation rate (consumer prices)2.5% (2017 est.)
0.4% (2016 est.)
Central bank discount rate0.9% (31 December 2016)
1.35% (31 December 2015)
Commercial bank prime lending rate1.6% (31 December 2017 est.)
2.09% (31 December 2016 est.)
Stock of narrow money$68.36 billion (31 December 2017 est.)
$55.64 billion (31 December 2016 est.)
Stock of broad money$80.77 billion (31 December 2017 est.)
$69.25 billion (31 December 2016 est.)
Stock of domestic credit$77.36 billion (31 December 2017 est.)
$70.11 billion (31 December 2016 est.)
Market value of publicly traded shares$21.59 billion (31 December 2016 est.)
$17.69 billion (31 December 2015 est.)
$14.51 billion (31 December 2014 est.)
Agriculture - productswheat, corn, sunflower seed, potatoes, sugar beets; pigs, cattle, poultry, dairy products
Industriesmining, metallurgy, construction materials, processed foods, textiles, chemicals (especially pharmaceuticals), motor vehicles
Industrial production growth rate5.5% (2017 est.)
Current Account Balance$6.339 billion (2017 est.)
$6.797 billion (2016 est.)
Exports$98.72 billion (2017 est.)
$91.6 billion (2016 est.)
Exports - commoditiesmachinery and equipment 53.4%, other manufactures 31.2%, food products 8.4%, raw materials 3.4%, fuels and electricity 3.9% (2012 est.)
Exports - partnersGermany 28.2%, Romania 5.2%, Slovakia 5%, Austria 4.9%, France 4.8%, Italy 4.8%, Czech Republic 4.2%, Poland 4.2% (2016)
Imports$93.28 billion (2017 est.)
$85.78 billion (2016 est.)
Imports - commoditiesmachinery and equipment 45.4%, other manufactures 34.3%, fuels and electricity 12.6%, food products 5.3%, raw materials 2.5% (2012)
Imports - partnersGermany 26.3%, Austria 6.4%, China 6.3%, Poland 5.5%, Slovakia 5.3%, Netherlands 4.9%, Czech Republic 4.9%, France 4.8%, Italy 4.8% (2016)
Reserves of foreign exchange and gold$27.02 billion (31 December 2017 est.)
$25.82 billion (31 December 2016 est.)
Debt - external$131.8 billion (31 December 2017 est.)
$131.3 billion (31 December 2016 est.)
Stock of direct foreign investment - at home$302.9 billion (31 December 2017 est.)
$298.2 billion (31 December 2016 est.)
Stock of direct foreign investment - abroad$225.3 billion (31 December 2017 est.)
$222.6 billion (31 December 2016 est.)
Exchange ratesforints (HUF) per US dollar -
279.5 (2017 est.)
281.52 (2016 est.)
281.52 (2015 est.)
279.33 (2014 est.)
232.6 (2013 est.)
Fiscal yearcalendar year

Source: CIA World Factbook
This page was last updated on January 20, 2018

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