Nation at a Glance - Hungary

History

Hungary became a Christian kingdom in A.D. 1000 and for many centuries served as a bulwark against Ottoman Turkish expansion in Europe. The kingdom eventually became part of the polyglot Austro-Hungarian Empire, which collapsed during World War I. The country fell under communist rule following World War II. In 1956, a revolt and an announced withdrawal from the Warsaw Pact were met with a massive military intervention by Moscow. Under the leadership of Janos KADAR in 1968, Hungary began liberalizing its economy, introducing so-called "Goulash Communism." Hungary held its first multiparty elections in 1990 and initiated a free market economy. It joined NATO in 1999 and the EU five years later.

Location: Central Europe, northwest of Romania

Border Countries: Austria 321 km, Croatia 348 km, Romania 424 km, Serbia 164 km, Slovakia 627 km, Slovenia 94 km, Ukraine 128 km

Total Area: 93,028 sq km Land: 89,608 sq km Water: 3,420 sq km

Climate: Temperate; cold, cloudy, humid winters; warm summers

Terrain: Mostly flat to rolling plains; hills and low mountains on the Slovakian border

Natural resources: Bauxite, coal, natural gas, fertile soils, arable land

Land use: Agricultural land: 58.9% arable land 48.5%; permanent crops 2%; permanent pasture 8.4% Forest: 22.5% Other: 18.6% (2011 est.)

Ethnic groups: Hungarian 85.6%, Roma 3.2%, German 1.9%, Other 2.6%, Unspecified 14.1%

Languages: Hungarian (official) 99.6%, English 16%, German 11.2%, Russian 1.6%, Romanian 1.3%, French 1.2%, Other 4.2%

Religions: Roman Catholic 37.2%, Calvinist 11.6%, Lutheran 2.2%, Greek Catholic 1.8%, Other 1.9%, None 18.2%, Unspecified 27.2% (2011 est.)

Population: 9,874,784 (July 2016 est.)

Literacy: 99.1%; Male: 99.1%; Female: 99% (2015 est.)

Administrative divisions: 19 counties (megyek, singular - megye), 23 cities with county rights (megyei jogu varosok, singular - megyei jogu varos), and 1 capital city (fovaros)

Economy: Hungary has transitioned from a centrally planned to a market-driven economy with a per capita income approximately two-thirds of the EU-28 average; however, in recent years the government has become more involved in managing the economy. Budapest has implemented unorthodox economic policies to boost household consumption and has relied on EU-funded development projects to generate growth. The economy is largely driven by exports, making it vulnerable to external market shocks. Following the fall of communism in 1990, Hungary experienced a drop-off in exports and financial assistance from the former Soviet Union. Hungary embarked on a series of economic reforms, including privatization of state-owned enterprises and reduction of social spending programs, to shift from a centrally planned to a market-driven economy, and to reorient its economy towards trade with the West. These efforts helped to spur growth, attract investment, and reduce Hungary’s debt burden and fiscal deficits. However, living conditions for the average Hungarian initially deteriorated as inflation increased and unemployment reached double digits. Conditions slowly improved over the 1990s as the reforms came to fruition and export growth accelerated. Economic policies instituted during that decade helped position Hungary to join the European Union in 2004; Hungary has yet to join the euro-zone, however. Hungary suffered a historic economic contraction as a result of the global economic slowdown in 2008-09 as export demand and domestic consumption dropped, prompting it to take an IMF-EU financial assistance package. Since 2010, the government has backpedaled on reforms and taken a more nationalist and populist approach towards economic management. The government has favored national industries, and specifically government-linked businesses, through legislation, regulation, and public procurements. In 2010 and 2012, the government increased taxes on foreign-dominated sectors, such as banking and retail, because the move helped to raise revenues and decrease the budget deficit, thereby allowing Hungary to maintain access to EU development funds. The policy deterred private investment, however. In 2011 and 2014, Hungary nationalized private pension funds. The move squeezed financial service providers out of the system, but it also helped Hungary curb its public debt and lower its budget deficit to below 3% of GDP, as subsequent pension contributions have been channeled into the state-managed pension fund. Hungary’s public debt (at 73.9% of GDP) is still high compared to EU peers in Central Europe. Despite these reversals, real GDP growth has remained robust in the past several years because EU funding increased, EU demand for Hungarian exports rose, and domestic household consumption rebounded. To further boost household consumption ahead of an anticipated 2018 election, the government has announced plans to increase the minimum wage and public sector salaries, decrease taxes on foodstuffs and services, cut the personal income tax from 16% to 15%, and introduce a uniform 9% business tax for small and medium-sized enterprises and large companies. Real GDP growth slowed in 2016 due to a cyclical decrease in EU funding, but increased to 3.8% in 2017, in part as Budapest front-loaded drawdowns of EU funds ahead of the planned 2018 election. Systemic economic challenges include pervasive corruption, long-term and youth unemployment, skilled labor shortages, widespread poverty in rural areas, vulnerabilities to changes in demand for exports, and a heavy reliance on Russian energy imports.

Agriculture - products: Wheat, corn, sunflower seed, potatoes, sugar beets; pigs, cattle, poultry, dairy products

Industries: Mining, metallurgy, construction materials, processed foods, textiles, chemicals (especially pharmaceuticals), motor vehicles