Economy
Economy - overview: Hungary probably had the most Western-oriented economy in East Europe before the transition to a market system began in 1990, and Budapest 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 the year resulted in more than $3 billion worth of sales of state firms to foreign investors - money used mostly to reduce Hungary's large foreign debt. Real GDP increased 2.9% in 1994 - following several years of steep decline - and about 1.5% in 1995 and only 0.5% in 1996. Unemployment reached 14% in early 1993 before gradually falling back to 11% in 1996. Inflation has oscillated; it reached 40% in mid-1991, dropped to 17% in early 1994, jumped back to 31% by mid-1995, and settled at 20% in 1996. Prospects for 1997 and 1998 are good compared with the situation earlier. Most forecasters expect 2% to 3% GDP growth in 1997 and slightly higher growth in 1998. Inflation and unemployment are edging down. With the government still committed to reform, both the budget and current account deficits are at IMF target levels - about 4% of GDP. Budapest also is making good progress in restructuring the pension, health, tax, education, and other systems as part of the effort to decrease the role of government. This dramatic shift in economic policy was rewarded in 1996 by the IMF, which finally signed the standby agreement Budapest had sought, and by the OECD, which welcomed Hungary as a member.
GDP: purchasing power parity - $74.7 billion (1996 est.)
GDP - real growth rate: 0.5% (1996 est.)
GDP - per capita: purchasing power parity - $7,500 (1996 est.)
GDP - composition by sector: agriculture: 7.3% industry : 31.9% services: 60.8% (1994)
Inflation rate - consumer price index: 20% (1996 est.)
Labor force: total: 6.2 million (1996) by occupation: services 58.7%, industry 34.7%, agriculture 6.6 (1996 est.)
Unemployment rate: 11% (1996 est.)
Budget: revenues: $10.2 billion expenditures : $11 billion, including capital expenditures of $NA (1995)