Macroeconomic Developments in Hungary and the Accession Process

Gacs, J. (2000). Macroeconomic Developments in Hungary and the Accession Process. IIASA Interim Report. IIASA, Laxenburg, Austria: IR-00-013

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Abstract

This paper evaluates the specific features of Hungary's macroeconomic performance since 1989 and draws up development scenarios for the future. The two scenarios assume accession and non-accession to the European Union in 2005. It is argued the Hungarian economy's strong reliance on exports and inward FDI, its sensitivity to current account deficits, and household sector's low propensity to save will persist in the coming years, although with some modification. It is envisaged that the most recent fast growth of exports and FDI will decelerate in the future; a modest revival is expected only if the country joins the EU in 2005. With this accession, trade activities will be livelier, with more possibility of increasing investment and the accommodation of higher imports by larger current account deficits. The expected transfers from the Union will be utilized to prepare the ground for another boom in FDI and indigenous investment in the eastern and other backward parts of the country. Only following these will there be a sensible (i.e. more than one percentage point) difference in the growth rate of GDP between the non-accession and the accession scenarios.

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