HUNGARY: MONETARY AND FISCAL POLICY ISSUES Intr

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 Westernoriented 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, nonmanufacturing 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 onehalf of the

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nnual income of US$6,200. Business profits are also taxed at a 40 percent rate, and a 25 percent on stateowned assets represents an additional tax on profits for those business enterprises so affected. Business enterprises are also required to pay social security contributions on employee salaries at a level of 44 percent of those salaries. An additional 4.5 percent tax on profits is levied to support the Central Technical Development Fund. Commercial loan interest rates hovered around 35 percent through 1991, but dropped to the midtwenties in 1992. Interest rates remained in the midtwenties in 1993. Earlier economic changes in Hungary were made within the structure of the socialist economic system. The economic restructuring that occurred did not move the country away from socialist ideology or goals, nor were they intended to cause such a move. The economic policies introduced by the reform government were intended to move the country away from socialism but not so fast that the people might notice and become disturbed. The reform government in Hungary attempted to both privatize the economy and maintain an essentially socialist state support structure so as to mitigate the dissatisfaction of the Hungarian public.
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Some common words found in the essay are:
Rapaczynski Earle, Monetary Fund, Economic Outlook, Fund Commercial, Property Agency, East European, Economic Situation, Hungary Prices, Free Democrats, Eastern European, reform government, hungarian economy, monetary fiscal, hungarian public, fiscal policy, communist government, multinational corporations, monetary fiscal policy, former communist, european community, journal economic perspectives, journal economic, eastern european countries, economic perspectives 5, perspectives 5 fall,
Approximate Word count = 2459
Approximate Pages = 10 (250 words per page)