Hungary country brief

Introduction/overview

Hungary is a landlocked country in Central Europe bordered by Slovakia to the north, Austria and Slovenia to the west, Croatia and Serbia to the south, and Romania and Ukraine to the east and north-east.  The population of Hungary is approximately 10 million.  The capital is Budapest.

Hungarians celebrate their national or State day on 20 August each year, known as the Day of the Foundation of the State of Hungary and St Stephen's Day (after Hungary's first king).  Hungary also celebrates national days on 23 October (commemorating the outbreak of the 1956 Uprising and the proclamation of the Hungarian Republic in 1989) and 15 March (commemorating the 1848-49 Revolution and War of Independence).

Political overview

Hungary has a democratically-elected, unicameral parliament, the National Assembly. The 386 members of parliament are elected under a combined system of party lists and single member electoral constituencies.

Parliamentary elections were last held in April 2010, the sixth elections since the end of the communist era in Hungary.  In the first round of elections on 11 April, the Fidesz-Christian Democratic People's Party (KDNP) coalition won an absolute majority of seats, giving it the power to form government on its own.  After the second round on 25 April, the Fidesz - KDNP coalition emerged with an overwhelming two-thirds majority (263 of the 386 seats), sufficient to allow it to modify major laws and the country's constitution without other parliamentary parties’ support.  Major legislative changes undertaken by the Fidesz-KDNP Government since 2010 have included a new Constitution, media, banking and religious laws.  Aspects of these laws have been subject to criticism, both within Hungary and from the EU. The next parliamentary elections are due to be held in April 2014.

Hungary’s current Prime Minister is Viktor Orbán, Mr Orbán is a founding member of the Fidesz Party and was Prime Minister between1998-2002. The current President, Dr János Áder, took up office on 2 May 2012, following the resignation in April of Dr Pál Schmitt.  The President, elected by the Parliament every five years, has a largely non-political role. The President does, however, have the right to send proposed legislation back to Parliament for reconsideration, or to the Constitutional Court for a review of its constitutionality.  

Hungary is a member of the World Trade Organization (one of the founding members), the International Monetary Fund (since 1982), the Organisation for Economic Cooperation and Development (since 1996), NATO (since 1999) and the European Union (since 2004). Hungary is also a member of the EU's visa-free zone, the Schengen Area, which it joined in December 2007.

Hungary is a member of the Visegrad Four, with Poland, Slovakia and the Czech Republic. This is an unofficial grouping of the four Central European countries which aims to promote closer cooperation between the four countries, all relatively new members of European integration.

Economic overview

Hungary has been one of the more advanced market economies amongst the new EU member states in Central and Eastern Europe, with the private sector accounting for approximately 80 per cent of GDP. The economy has been extensively liberalised through privatisation, foreign investment and the introduction of comprehensive commercial laws. Further reforms are planned. Key reasons why foreign investors choose Hungary are the quality of its workforce, its excellent infrastructure, its central geographic location and relatively low costs. In recent years, Hungary's heavy taxation regime and the absence of essential administrative reforms have significantly impacted on its business environment, although it still remains a major recipient of foreign direct investment.

The Hungarian economy is closely tied to the fortunes of the leading Eurozone economies, especially Germany. About three quarters of Hungary's exports go to EU countries, primarily Germany, Austria, France and Italy. Russia is also an important trading partner, supplying most of Hungary's natural gas needs and other energy and mineral resources.

Hungary has been experiencing difficult economic conditions.  An unsustainable budget deficit forced the introduction of severe government spending restrictions in 2006 and this led to a drop in economic growth and consumer and business confidence.  The onset of the global economic crisis compounded Hungary’s economic problems.  In October 2008, Hungary had to turn to international financial institutions for help to restore investors' confidence in the country's economy.  As a result, the IMF, the EU and the World Bank concluded a Stand-by Agreement with the country and provided a loan of approximately EUR 20 billion.

In 2009, Hungary’s economy contracted sharply by 6.3 per cent.  A jump in exports initiated a recovery in 2010, and by 2011 approximately 1.8 per cent growth had been achieved.  Unemployment remains high, at more than 11 per cent in 2011. In late 2011, major ratings agencies Moody’s and Standard and Poor’s downgraded Hungary’s debt to “junk” status, citing high levels of debt and weak prospects for growth.  Ongoing economic weakness in the Eurozone is likely to further constrain Hungary’s economic growth in 2012.  

Bilateral relationship

Hungary and Australia enjoy friendly, co-operative relations with strong people to people links flowing from the large numbers of Hungarians who migrated to Australia in the twentieth century, especially following the 1956 Uprising against the Soviet occupation of Hungary. At the time of the 2006 Census, there were 67,625 people in Australia of Hungarian ancestry. Hungarian-Australians have been active in the fields of business, academia, politics and the arts and count amongst their number well-known Australians such as the former NSW Premier, Mr Nick Greiner AC, businessman Mr Frank Lowy AC, Executive Chairman and co-founder of the Westfield Group, artist Ms Judy Cassab CBE AO, and SBS sports commentator, Mr Les Murray AM.

Australia established full diplomatic relations with Hungary in 1972 and both countries have resident diplomatic representation.

High-level visits between Australia and Hungary have served to develop bilateral relations. In March 2012, a Parliamentary Delegation led by the Speaker of the House of Representatives visited Budapest. The former Minister for Foreign Affairs, the Hon Kevin Rudd MP, visited Hungary in June 2011 to attend the Asia-Europe Foreign Ministers’ Meeting.  Former Minister for Foreign Affairs, the Hon Stephen Smith MP, visited Hungary in July 2009.  Australia's former Minister for Veterans' Affairs, the Hon Bruce Billson MP, represented Australia at the official commemorations of the fiftieth anniversary of the 1956 Uprising in October 2006. The Hon Alexander Downer MP, then Minister for Foreign Affairs, visited Hungary in September 2005. In March 2003, the then Minister for Communications, Information Technology and the Arts, Senator the Hon Richard Alston also visited Hungary.  A study group of the Trade Sub-committee of the Joint Standing Committee on Foreign Affairs, Defence and Trade visited Budapest in April 2003 as part of its inquiry into Australia's trade and investment relations with Central European countries.  In May 2007, a delegation of the Queensland State Parliament visited Budapest.  

In October 2011, the Deputy Prime Minister of Hungary, Mr Zsolt Semjén, visited Australia.  The then President of Hungary, Dr László Sólyom, visited Australia in September-October 2009. The First Deputy Speaker of the Hungarian Parliament, Mr László Mandur, visited Australia in November 2009.  The parliamentary floor leader of the opposition Fidesz Party, Dr Tibor Navracsics, visited in August 2009.  Dr Ibolya Dávid, leader of the minor opposition party, the Hungarian Democratic Forum, visited Australia in November 2004.  The Speaker of the Hungarian Parliament, Dr Katalin Szili, visited Australia in November 2002.  The State Secretary in the Hungarian Ministry for Foreign Affairs, Mr László Várkonyi, visited Australia in July 2009 for high-level consultations.

Australian opera singer, producer, actor and composer, Deborah Cheetham, visited Budapest in May 2012, together with pianist, Toni Lalich. Ms Cheetham – a Yorta Yorta woman and soprano – composed Australia's first Indigenous opera, Pecan Summer, and created Short Black Opera, a not-for-profit opera company devoted to the development of Indigenous opera singers. The Australian Embassy in Budapest arranged a program which raisedlocal awareness of a range of issues related to social inclusion and brought Hungarians closer to Indigenous Australian experiences.

Bilateral agreements between Australia and Hungary include treaties on Mutual Assistance in Criminal Matters and Extradition (1997) and an agreement on Cooperation in the Peaceful Uses of Nuclear Energy and the Transfer of Nuclear Material (2002). A bilateral Social Security Agreement was signed in June 2011. Australia's economic relations with Hungary are facilitated by a bilateral Double Taxation Agreement and an Investment Promotion and Protection Agreement.

Bilateral economic and trade relationship

Hungary’s position in Europe as a landlocked country and its relative lack of natural resources has necessitated a traditional reliance on foreign trade.

Since Hungary's EU accession in 2004, increasing numbers of Australian businesses have been exploring Hungary's potential as a base for operations in the EU, and especially in the Central/Eastern European region. The total volume of merchandise trade remains modest and overwhelmingly in Hungary's favour. Total two-way merchandise trade in 2011 was valued at A$426million, with Australia an importer of Hungarian telecom equipment and parts (A$102million), electrical circuit equipment (A$45million), computers (A$38 million) and passenger motor vehicles (A$32 million). Major Australian exports to Hungary include measuring & analysing instruments (A$5 million), aircraft, spacecraft and parts (A$3 million), telecom equipment and parts (A$1 million), and plastic articles (A$1 million).

At 31 December 2011, Australian investment stock in Hungary was estimated at A$203million, a 43 per cent increase on 2010 figures. Hungarian investment in Australia was estimated at A$15 million, up 25 per cent on 2010 figures. Several Australian companies are active in the energy sector in Hungary, including uranium prospecting, clean energy technologies and renewable energy production. Public works and transport infrastructure and services, including franchising, continue to offer attractive opportunities.

There is scope for further growth in trade and investment, taking into account the two countries' respective positions in international commercial supply chains, especially in sectors such as motor vehicle manufacturing, energy and resources exploitation, and general engineering.

Trade Successes

Australian companies with investment interests in Hungary include the Macquarie Group, AMP Capital Investors, QBE-Atlasz Insurance, Goodman Logistics, Adina Apartment Hotels, WildHorse Energy, Green Rock Energy and others. Cochlear Limited is active in Hungary and other countries in the Central European region, providing hearing implants. Future opportunities to develop trade and investment have been identified in infrastructure, government-related services (particularly health and e-government), consumer goods, food and beverages, computer and telecommunications software and services, building and construction technologies and education services. Hungary's EU membership also offers opportunities for Australian business in areas such as environmental technologies and solutions.

Last reviewed: July 2012