Hungarian Economy Today
Hungary, as a member state of the European Union may seek to adopt the common European currency, the Euro. To achieve this, Hungary would need to fulfill the Maastricht criteria.
In foreign investments, Hungary has seen a shift from lower-value textile and food industry to investment in luxury vehicle production, renewable energy systems, high-end tourism, information technology.
The austerity measures introduced by the government are in part an attempt to fulfill the Maastricht criteria.
The austerity measures include a 2% rise in social security contributions, half of which is paid by employees, and a large increase in the minimum rate of sales tax (levied on food and basic services) from 15 to 20%.
Hungary, which joined the European Union in 2004, has been hit hard by the late-2000s recession because of its heavy dependence on foreign capital to finance its economy and has one of the biggest public deficits in the EU.
Total government spending is high. Many state-owned enterprises have not been privatized. Business licensing is a problem, as regulations are not applied consistently. According to the conservative think tank Heritage Foundation, Hungary's economy was 67.2% "free" in 2008, which makes it the world's 43rd-freest economy. Its overall score is 1% lower than last year, partially reflecting new methodological detail. Hungary is ranked 25th out of 41 countries in the European region, and its overall score is slightly lower than the regional average.
In 2011 the Hungarian economy showed signs of recovery with decreasing tax rates and a moderate 1.7 percent GDP growth from the previous financial crisis, however, in November 2011 Moody’s has downgraded Hungary's sovereign credit rating to Ba1, just below investment grade, because of mounting financial-sector funding pressures and the general government debt which is of 81% of GDP (2010). Economic reform measures such as health care reform, tax reform, and local government financing are being addressed by the present government.
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