Hungarian Economic Policy between 1989 and 2019

Abstract

The stirring social and political events of the change of regime in 1989/1990 and the subsequent periods have had an extremely powerful effect on the transformation of the Hungarian economy. Hungary entered the European order of market economy with partial monetisation, oversized industry, and neglected infrastructure. The economic policy thinking was dominated by worries about external indebtedness and by the intention of definitively joining the western political system, while closing the gap between the income levels of Hungary and the developed West was in the focus of social expectations. The establishment of the institutional system of market economy and getting into the western order have eventually been successfully accomplished, yet income convergence has proved to be uneven and slow, which has led to widespread frustration. The financial crisis of 2008 exposed the risks arising from high degree of trade and financial openness. As a joint result of unorthodox economic policies of the subsequent period and beneficial external conditions, Hungary’s external exposure has decreased to date. However, growing centralisation and the government’s pro-sovereignty policy will increase the frequency of conflicts with EU institutions. Despite economic policies to accelerate convergence, Hungary’s middle-income status has become permanent, strengthening external and internal migration and increasing regional tensions in the country. Th e new phenomena of product and labour markets, as well as new technological trends will put Hungarian economic policy to test. Besides, adjustment tasks emanate from ongoing complex European policy changes.