T HE E CONOMY OF H UNGARY ByDiyan Mitev

G ENERAL I NFO ON H UNGARY Area: total: 93,030 sq km – 115rank Population: 9,930,915 (July 2008 est.) Birth rate: 9.59 births/1,000 population (2008 est.) Death rate: deaths/1,000 population (2008 est.) Government type: parliamentary democracy Education expenditures: 5.5% of GDP (2005) – 48rank

H UNGARY E CONOMY - OVERVIEW 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 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 Unemployment has persisted above 6%. 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 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 The government plans to eventually lower its public sector deficit to below 3% of GDP to adopt the euro. (By 2011)

H UNGARY GDP purchasing power parity: $191.7 billion (2007 est.) GDP (official exchange rate): $138.4 billion (2007 est.) GDP - composition by sector: agriculture: 2.8% industry: 31.5% services: 65.8% (2007 est.) GDP - real growth rate: 1.3% (2007 est.)

H UNGARIAN D EMOGRAPHICS Labor force: 4.19 million (2007 est.) % Growth Rate Unemployment rate: 7.3% (2007 est.) % Population below poverty line: 8.6% (1993 est.)

I NFLATION AND B ANKING Inflation rate (consumer prices): 8% (2007 est.) Budget: revenues: $64 billion - expenditures: $71.87 billion (2007 est.) Central bank discount rate: 7.5% (31 December 2007) – 53rank Commercial bank prime lending rate: 9.09% (31 December 2007) – 104rank Stock of domestic credit: $109.5 billion (31 December 2007) – 42rank Investment (gross fixed): 20.9% of GDP (2007 est.)

M AIN E CONOMIC S ECTORS Electricity - production: billion kWh (2007 est.) Electricity - consumption: billion kWh (2006 est.) Electricity - exports: billion kWh (2007 est.) Electricity - imports: billion kWh (2007 est.)

Oil - production: 32,580 bbl/day (2007 est.) Oil - consumption: 162,800 bbl/day (2007 est.) Oil - imports: 178,400 bbl/day (2005) Oil - exports: 66,660 bbl/day (2005)

Natural gas - production: billion cu m (2007 est.) Natural gas - consumption: billion cu m (2007 est.) Natural gas - exports: 138 million cu m (2007 est.) Natural gas - imports: billion cu m (2007 est.)

E XPORTS - I MPORTS Current Account Balance: -$8.018 billion (2007 est.) Exports: $87.77 billio Exports - partners: Germany 28.1%, Italy 5.6%, France 4.7%, Austria 4.6%, Romania 4.5%, UK 4.5%, Slovakia 4.2%, Poland 4.2% (2007) n f.o.b. (2007 est.) Imports: $86.88 billion f.o.b. (2007 est.) Imports - partners: Germany 26.6%, China 7.8%, Russia 6.9%, Austria 6.1%, Italy 4.5%, France 4.3%, Netherlands 4.3% (2007)

C URRENCY Exchange rates: forints (HUF) per US dollar (2007), (2006), (2005), (2004), (2003) Reserves of foreign exchange and gold: $24.05 billion (31 December 2007 est.) Debt - external: $125.9 billion (31 December 2007)

More Recent Economic Developments in Hungary The Hungarian central bank raised its main rate of interest by 3.0%, to 11.5%, as it attempted to stanch an investment outflow and give support to its forint currency. (Doubted to work) The European Central Bank is lending Hungary up to 5.0 billion euros ($6.4 billion) to help support liquidity "The government says that its financial system is in good shape, but we note that Hungary is very vulnerable in terms of large current account deficits and high external debt load,"... "If pressure continues, an IMF program is likely.“ – Brown Brothers Harriman Lars Christensen (Denmark's Danske Bank ) - There are clear similarities between Iceland and countries in Central and Eastern Europe, such as strong credit growth, property market bubbles, foreign currency lending. It's important to underline that the Icelandic crisis has to do with the collapse of the Icelandic banking sector. In contrast, the banking sector in Central and Eastern Europe is foreign- owned and that's positive.

T HANK Y OU FOR THE A TTENTION Sources: