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HUNGARY


 

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 82,805 65,843 51,900 41
         
GNI per capita
 US $ 6,330 5,280 4,830 67
Ranking is given out of 208 nations - (data from the World Bank)

Books on Hungary

REPUBLICAN REFERENCE

Area (sq.km)
93,030

Population 
10,032,375

Capital 
Budapest

Currency 
Forint 

President 
Ferenc Madl

Private sector 
% of GDP
 
60%




Update No: 108 - (30/05/06)

Communism is king
In Hungary, those on top or the aristocrats always seem to win in the end. When the Austro-Hungarian Empire was on the ropes, Count Mikhail Karolyi was appointed president, the first in its ancient history. 
But he made a fearful hash of it. The Western powers imposed the Treaty of Trianon in 1919 on his country, dismembering it of two-thirds of its territory. He knew less about it than his Western interlocutors, including the brilliant Polish- cum-British historian, Lewis Namier, who made sure that Hungary lost its birthright in Transylvania and much else besides.
He then handed power over to Bela Kun, a pure communist, for three months. Hungary did not escape fascism, which it had in the mild mimetic form of Admiral Horthy for two decades and then in the virulent form of the Arrow Cross for six months in 1944.
Then back to communism again in late 1944. This seems for the moment its inevitable revenant, with communists' natural heirs, the socialists having just won re-election in April.

Electoral ratification
Formally Hungary has no government until a new administration is sworn in, probably in mid-June.
The second round of parliamentary elections on 23rd April decided the fate of the current social-liberal government coalition, which secured a slight majority after the first round. It was successful in the second round too, only just - but enough so for it to be the first time since the fall of communism that a government in Hungary has managed to get itself re-elected. 
The ruling left-wing coalition, indeed, won the country's first parliamentary elections since it joined the European Union in 2004. The Hungarian Socialist Party and its liberal ally beat the centre-right opposition. There were naturally scenes of great celebration at the packed Budapest headquarters of the ruling Hungarian Socialist Party, which has made history. 
Election officials said the Socialists and its liberal coalition partner Alliance of Free Democrats have around 210 seats in the 386-member parliament. 
The main centre-right opposition party Fidesz and the smaller right-wing Hungarian Democratic Forum Party reportedly have 175. As soon as the results became known, Fidesz leader and former premier Viktor Orban acknowledged defeat and congratulated the Socialist Prime Minister on his victory. A victory of Fidesz seemed increasingly unlikely from the moment that their leader Orbán withdrew his candidature for the post of prime minister. 
The irony is rich in that the dominant party in the coalition, the Socialist Party, is the heir to the Communist Party no less. But then to make it richer still they are led by one of the wealthiest men in Hungary, a mega-tycoon, Ferenc Gyurcsany, who made his money in the early years by staying on the fence, opting for the new mantra of democracy and capitalism, while remaining close to the former communist power apparatus. Post-communist Hungary is an outré Alice-in -Wonderland world, not ruled by the White Queen, but in which Humpty-Dumpty is king.

The putative post-electoral Socialist future
Mr. Gyurcsany told his supporters that his administration would create a more equal society amid concerns over social tensions in Hungary, which joined the European Union two years ago. "I believe in Hungary. I believe that we can build up a Hungary that will be open for everyone and where it doesn't matter where you are born in a small village or a town," he says. "We want to create a country where it is worthwhile to work and where you can get rich by using your talents and hard work." 
The 44-year old Mr. Gyurcsany, a former Communist who became a self-made millionaire before returning to politics, considers British Prime Minister Tony Blair his political mentor. Mr. Gyurcsany's left-wing coalition has made clear it wants to embrace globalization and free market reforms while fighting for social justice.

Government programme expected on May 30
Gyurcsany spoke at a meeting of the party's 31-strong national committee on May 13th and said that negotiations with the liberal SZDSZ, MSZP's coalition partner, were going well and the government could be formed on June 14th. 
The prime minister said that the new government would seek to introduce deep and thorough reforms, starting in those areas of public administration that were the closest to policy making. What the country needs is fewer parliamentary committees and state secretaries, smaller administration and changes in the system of ministries, he added. 
Touching upon issues around the country's high public sector deficit, Gyurcsany expressed his conviction that a year and a half would be enough to set that right. He also said, however, that creating a new and modern Hungary would take longer than that. 
MSZP Chairman Istvan Hiller voiced satisfaction over his party's results at the general elections, and said that MSZP now had a greater support among voters living in rural areas and that it was also more popular with young people. He added that the party could build on the election victory and work to renew the political left in Hungary.
"Our victory lends a historic opportunity to MSZP and the modern Hungarian left," he said.

Western concerns
While Western investors welcome the pro-business rhetoric of the Socialists, there is growing concern over the ballooning budget deficit which stood at around six percent of gross domestic product in 2006. 
The deficit is the highest within the European Union and is a threat to Hungary's plans to meet the requirements to introduce the euro currency in 2010. 
The celebrations were expected to be short-lived as some officials have already spoken off massive lay-offs among state workers and other tough social measures to reduce both the budget deficit and improve Hungary's competitiveness.

The problems are ahead
Whether the Socialists or Fidesz won, it was always going to be the same question - the winner would face the daunting task of strengthening the financial reputation of Hungary, damaged by the large budget deficit (6% higher than allowed under the EU convergence criteria). 
This in turn will determine the country's future introduction of the euro. Hungary's accession to the euro zone is initially scheduled for 2010, but may possibly be shifted to 2014, if the unstable economic situation prevails. Those who are opposed to the EU in its present form could not be more convinced of their insight than by the present article. It rather bears out the view of the recently deceased elderly statesman, John Kenneth Galbraith, that in his own words : "Vested interests win out over idealism every time in my experience."

Hungary opposes radical reform of EU agriculture
People's Daily Online, China, May 11th
As a largely agricultural country with an export-oriented wheat market, Hungary can not support any radical agricultural reforms in the European Union (EU), a Hungarian government minister said on May 11th. 
Jozsef Graf, Hungary's minister of agriculture and regional development, told a two-day joint congress of the International Food and Agricultural Trade Policy Council and the European trade association COCERAL in Budapest, that Hungary's agricultural sector had been export-oriented over the past 15 years. Hungary's annual cereal output of around 12 million tons exceeds the need for domestic consumption, which is around 8 million tons per year, he noted. 
For the past two years following its EU accession, Hungary has accumulated substantial stocks of surplus cereals, partly as the result of an exceptionally good harvest last year, he said, adding that the country's contribution to the EU of its surplus wheat constitutes 50 per cent of the intervention stock of the 25-member bloc in the 2005-2006 fiscal year. 
Hungary's maize contribution alone accounted for 82 per cent of the EU intervention stock, Graf said. 
The minister said that 70 per cent of the Hungarian territory was arable land, and due to its landlocked conditions, the country's transport costs significantly hiked up the price of its wheat. 
Although the Hungarian government is planning to enhance competitiveness in the sector, such as further promotion of animal husbandry, modernization in horticulture and better marketing, Hungary opposes radical EU reforms of agriculture, Graf said. 
Hungary is not in favour of changing the Common Agricultural Policy unless in areas that are absolutely necessary, the minister said. 
At the joint congress, EU Agriculture Commissioner Mariann Fischer Boel warned against the size of the EU's intervention wheat stock, which has swollen from 3 million tons in 2004 to 18 million tons at present, calling for reform of the grain market. 
Key topics on the congress agenda also include agricultural negotiations at the World Trade Organization, impact of EU enlargement and sustainability goals, including expansion in biofuels trade.

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AVIATION

Polish passengers spell success for Wizz airline 

Air Hungarian Wizz Air has so far been the largest budget airline in the region and claims to retain its position through 2006, New Europe has reported.
Company President, Jozsef Varadi, announced that "two million passengers would fly with us to and from Poland." Polish passengers will contribute to two-thirds of all the carrier's passengers of the airlines' estimated three million travellers for 2006. "We closed last year with a 40 per cent share of the market and we hope to keep this position this year," Varadi said. He added that such a large growth in the number of ticket sales cannot be maintained much longer, but still the increment should stand at 20-30 per cent annually for the next five years. "I think that in 2010 all cheap airlines will transport about 10 million persons. We would like 30-40 per cent of this figure to be in our control," he said.

SkyEurope launches Budapest-Naples flights 

Discount airline SkyEurope recently launched a direct flight service between Budapest and Naples once a week, leaving Budapest on Friday mornings and returning on Monday mornings, New Europe reported.
Naples is the latest of the 96 destinations now directly accessible from Budapest's Ferihegy International Airport. Also accessible are: Milan, Rome, Venice and Bologna. In 2005, approximately 314,500 Italian tourists and businesspeople flew to Budapest, accounting for 3.9 per cent of the airport's passenger traffic.

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BANKING

IEA wraps up acquisition of Bulgaria's Unionbank 


Hungarian bank IEA (Magyar Kulkereskedelmi bank, MKB), a subsidiary of Bayerische Landesbank, recently finalised the buying of a 60 per cent stake in Bulgaria's Unionbank after the deal cleared all regulatory hurdles, New Europe reported.
The acquisition price was not disclosed. The general meeting of shareholders met recently, to rename the bank MKB Unionbank and elect new members of the supervisory board. The sale procedure for the 60 per cent stake in Unionbank kicked off in late 2004. The shortlist included US conglomerate General Electric. Unionbank controls 1.5 per cent of the total assets of the Bulgarian banking sector. The bank operates 43 branches.

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FOREIGN TRADE

Joint innovation business council with Hong Kong
 

A joint business council of innovation has been set up between Hungary and China's Hong Kong Special Administrative Region (HKSAR), the Hungarian News Agency MTI reported.
The council was established with the aim of boosting business and trade ties between Hungary, HKSAR, mainland China and the Southeast Asia region. It is set to lead to an increase in technological innovations in major industrial firms in the region by wedding Hungary's traditional innovative power with China's rapid R&D capability, competitive manufacturing capacity, huge international trade potentials and strong markets in southeast Asia. The council's presence in Hong Kong also paves the way for Hungary to enter the "Chinese silicon valley" and the increasingly important market in its neighbouring Shenzhen, a special economic zone in China that has formed a solid economic belt with HKSAR.

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PHARMACEUTICALS

Richter not planning any acquisitions
 

Pharmaceuticals company, Richter Gedeon Rt, is not planning any acquisitions, but is instead aiming to grow by relying on its markets in countries in the Commonwealth of Independent States (CIS) and by concentrating on generics, high margin gynaecological products and original patents, Chief Executive Officer, Erik Bogsch, said in an interview with internet business portal portfolio, New Europe reported. 
Richter's growth would be ensured by the stability of Russia's economy and politics, Bogsch said. Richter has started production locally with a wide range of products at the right time, as many of Richter's drugs have been included on a special list of state-subsidised medicines and Russians are now able to afford pricier drugs, it was reported. 
Bogsch noted that local production was a condition for the inclusion of Richter's drugs on the state-subsidised medicines list. Richter's unconsolidated revenue from exports to CIS countries rose 40.1 per cent to US$215.9 million in 2005 and accounted for nearly half of the total export revenue. The revenue from sales of drugs on Russia's state subsidised medicines list amounted to US$30 million.

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RETAIL

Tesco plans opening 25 new stores in Hungary 


United Kingdom based retail giant Tesco is planning to carry out its biggest expansion in Hungary since it set up shop in the country 11 years ago by opening 25 new stores and 17 new fuel stations, the company said on April 25th, New Europe reported.
Paul Kennedy, Chief Executive Officer of Tesco-Global Aruhazak, the Hungarian unit, said in a statement that "We have already opened four new hypermarkets this year and plan an additional 21 by the end of the year, creating 2,500 new jobs in the process." In 2005, the firm opened 14 new shops nationwide and 15 fuel stations, while increasing its gross revenues by 14 per cent to 473 billion forints. This represents some three per cent of Tesco's global sales of GBP 41.8 billion. The opening of new units last year created 2,200 jobs, bringing the total number of Hungarian Tesco employees to 17,000 by the end of the year, which will approach 20,000 by the end of 2006 as expansion continues. This year, Tesco will continue the shift towards smaller-scale supermarkets as the market for hypermarkets becomes saturated.

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