Economic overview: Hungary, probably the most Western-oriented economy in East Europe before the transition to a market system began in 1990, made good progress in the initial years of transition. The reform process slowed in 1993-94, however, in part because of the May 1994 elections and the resulting change in government. By 1994 the privatization of state firms had ground to a halt, while both the budget and current account deficits soared to unsustainable levels - about 8% and 10% of GDP, respectively. The situation improved sharply in 1995; an austerity program introduced in March reduced both deficits, and a renewed privatization effort later in 1995 resulted in more than $3 billion worth of sales of state firms to foreign investors - money that will be used to reduce Hungary's large foreign debt. As for other macroeconomic developments, real GDP increased 2.9% in 1994 - following several years of steep decline - and about 1.5% in 1995. Unemployment reached 14% in early 1993 before gradually falling back to 10% in 1995. Inflation has oscillated; it reached 40% in mid-1991, dropped to 17% in early 1994, and then jumped back to 31% by mid-1995. Prospects for 1996 are good. With the government still committed to austerity, both the budget and current account deficits should fall to about 4% of GDP. Economic growth is expected to be about 2% and unemployment at about 10%, with inflation falling to 20% by yearend. In March 1996 the IMF signed a new standby loan agreement with Budapest, and the OECD approved Hungary's application for admission.
GDP: purchasing power parity - $72.5 billion (1995 est.)
GDP real growth rate: 1.5% (1995)
GDP per capita: $7,000 (1995 est.)
GDP composition by sector: agriculture: 7.3% industry: 37.5% services: 55.2%
Inflation rate (consumer prices): 28.3% (1995)
Labor force: 4.8 million (1995) by occupation: services, trade, government, and other 47.2%, industry 29.7%, agriculture 16.1%, construction 7.0% (1991)
Unemployment rate: 10.4% (yearend 1995)
Budget:
revenues: $12.6 billion
expenditures: $13.8 billion, including capital expenditures of $NA
(1995)
Industries: mining, metallurgy, construction materials, processed foods, textiles, chemicals (especially pharmaceuticals), motor vehicles