HUNGARY: MONETARY AND FISCAL POLICY ISSUES
This research examines the monetary and fiscal policy issues confronting Hungary in 1994. An overview is presented of both the current economic situation in Hungary and current governmental monetary and fiscal policy in that country. The effects monetary and fiscal issues of the Hungarian approach to privatization is analyzed, and a prognosis for the country's economy is presented.
To be brief, in present day Hungary the economy is in as bad or worse shape than it was under the former Communist system. This status is the reality of the situation, and is inconsistent with the proclamations of the country's recently defeated Western oriented government and the assessments of American and other economists too numerous to count.
In 1991, the most recent year for which accurate data are available, non manufacturing industrial activity accounted for 38 percent of Hungary's gross domestic product (GDP), while manufacturing accounted for 28 percent, services for 20 percent, and agriculture 14 percent. This structure places Hungary at some point between a Third World country and a developed economy within the context of the structure of production.
The 200 largest enterprises in Hungary employ 17 percent of the labor force. Proportionally to the relative size of the economies of Hungary and the United States, a comparable number of firms in the United States employs almost one half of the workforce. Inflation is high in Hungary. Prices rises have not slowed during the country's post Communist recession. Double digit inflation in the twenties, double digit unemployment in the teens, and low wages have combined to create an economic nightmare for the majority of Hungarians.
Economic progress is not being accomplished in the context of growth in Hungary, the East European country with an economy closest to a western model Economic growth averaged six percent per year in the 1971 19...