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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




Update No: 126 - (26/11/07)

The bullyboy saviour
The Hungarians are at their wits' end. They have a scoundrel and a serial liar as their leader; Ferenc Gyurscany has admitted as much. He confessed that he lied and lied again to get re-elected last year. His partisans however might say that he is only unusual in that he admitted it, whilst other leaders are less candid.

But he is a clever man for all that. He made a million or two out of the collapse of communism. He was head of the Communist Youth League, whose hotels and gymnasia, etc, he made over to proxies of himself. He is now the Butlin of Lake Balaton.
The Hungarians are counting on him being the proverbial poacher turned gamekeeper.

At the brink 
Hungary is in a ghastly hole. It began to run a huge public deficit, nearly 10%of GDP. The ex-communists who ran the show kept making promises that they could not keep.

The government is nearing the end of its period of severe fiscal austerity, but the structural reforms will continue and a budget deficit of less than 3% of gross domestic product is within reach in the coming years, Prime Minister Gyurcsany said on November 15. 

"The period of austerity measures seen in the past 1.5 years is over but this doesn't mean that the reforms are done. Now a period of improvement and construction is to come," Gyurcsany said at a conference organized by domestic think tank GKI. 

The ongoing painful reforms of Hungary's healthcare, education, and public sectors are not only aimed at bringing the budget back to a sustainable course but also at putting an end to stop-go fiscal cycles, and at convincing Hungarians that no more can be spent on social services than is received in the budget. 

"In a small and open economy such as Hungary's, we need to aim to have a budget that has not a 3% deficit but which is totally balanced (with no deficit)," Gyurcsany said. 

Hungary recorded the biggest budget deficit as a percentage of gross domestic products in the European Union last year, at 9.2%. The austerity measures carried out this year and last year amounted to 7.5% of GDP, one of the biggest spending cuts ever by a European country, Gyurcsany said. "A stable, less than 3% (of GDP) budget deficit could come during the current (political) period," Gyurcsany said meaning the current Socialist party-led government cycle. 

Concerns from analysts and investors that Hungary will fail to meet its budget deficit reduction goals in the coming years, including 2010, are "unfounded," Gyurcsany said. The bill on new budget planning rules submitted to parliament will serve as an institutional guarantee for reaching those targets, he added. 

As a result of the fiscal spending cuts, Hungary's GDP growth has slowed sharply and analysts fear that the country is facing stagflation. "The question is, then, where economic growth will come from? We need to reject all ideas that suggest that growth should come from boosting domestic consumption and boosting domestic investment demand," Gyurcsany said. 

"This was one of the gravest mistakes in the past years and there's no road back to that," he added. 

Gyurcsany's Socialist party and the leading opposition party, the center right Fidesz party's views strongly differ regarding that, Gyurcsany added. With the budget lowering its financing need, the private sector will gain room to invest and develop, the premier said. Furthermore, development programs drafted by the government will add to that, he added. 

Growth to pick up
GDP growth will be significantly faster in 2008 at about 3%, compared with 2007 and economic growth of around 4% is realistic from 2009 onward, Gyurcsany added. The government forecasts 2007 GDP growth at 2.2%.

Hungary's economy will grow faster in 2009 or 2010 once the current period of economic adjustment has been completed, the Prime Minister said on November15 after figures showed that growth had dropped to an 11-year low. 

Over the last few years Hungary has enjoyed annual growth of around 4 per cent, but tax hikes, energy price increases and other measures aimed at cutting the budget deficit have taken their toll. 
The third-quarter figure was even lower than the second quarter's 1.2 per cent, bringing growth over the first nine months of the year to 1.6 per cent. 'We are now paying the price of what we did between 2001 and 2006,' said Gyurcsany, referring to poor fiscal discipline during the period. 

Speaking after meeting Angel Gurria, secretary general of the Organization for Economic Cooperation and Development (OECD), the prime minister said he was committed to his reform. 'There is no growth unless we dare to change,' he said. 

The government is attempting to reduce its budget deficit, which, at 9.2 per cent of gross domestic product in 2006, was the highest in percentage terms in the European Union. 

Bodies such as the OECD had long been calling for Hungary to address the problem before the government acted, and Gurria said that a sustainable fiscal policy was key to economic growth. 'No country can achieve economic growth if the state's financial position is unstable or if its debt is growing,' he said. 

Main centre-right opposition party Fidesz, however, criticized the government for leading the country into a slump, pointing out that Hungary now had the lowest growth in the European Union. 
'The Gyurcsany government has turned Hungary into Europe's straggler,' Fidesz deputy chairman and former finance minister Mihaly Varga said. 

Many of Hungary's regional neighbours are seeing growth figures of between 5 and 10 per cent. 
Growth in the EU as a whole is expected to hit 2.9 per cent in 2007, although Brussels is predicting growth will drop to 2.4 per cent through 2008 and 2009. 

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