Hungary Country Brief
Introduction/overview
The Republic of Hungary is a landlocked country in Central Europe bordered by the Slovak Republic to the North, Austria and Slovenia to the West, Croatia and Serbia in the South with Romania and Ukraine lying to the East. The population of Hungary is approximately 10 million.
Hungarians celebrate their national day on the 23rd of October each year.
Political Overview
Hungary has a democratically-elected, unicameral parliament, the National Assembly. At the parliamentary elections on 23 April 2006, the Hungarian Socialist Party (MSZP) won 190 seats and their coalition partners, the Free Democrats (SZDSZ), won 20. The main opposition party, Fidesz (Young Democrats), won 164 seats on a joint list with the Christian Democrats (KDNP) and the Hungarian Democratic Forum (MDF) won 11, with one independent. The election resulted in the Government increasing its majority in parliament from 10 seats (2002) to 34. This is the first time a Hungarian Government has been re-elected since the fall of communism in 1989. Voter turnout on election day at the second round was 64.4 per cent.
The Hungarian Parliament elected Ferenc Gyurcsány as Hungary’s Prime Minister on 29 September 2004 while, on 7 June 2005, Dr László Sólyom was elected President. The main policy aims of the Socialist-Free Democrat Government are to reduce the budget deficit, to reform the public sector with the aim of joining the Eurozone, and to develop the economy in line with free market principles. The economic austerity measures and reform programs introduced by the Government in early September 2006 and in the course of 2007 in order to meet these objectives have led to widespread public discontent. A referendum – to be organized in spring on the reform steps – could further deepen the political divide between Hungarians and tension may rise again.
Hungary joined the Organisation for Economic Cooperation and Development (OECD) in 1996, NATO in 1999 and the European Union in 2004. Hungary is also a member of the EU’s visa-free zone, the Schengen Area, which it joined in December 2007.
Economic Overview
An EU member since 1 May 2004, Hungary has been one of the most advanced new EU-accession market economies in Central and Eastern Europe, with the private sector accounting for approximately 75 per cent of GDP. The economy has been extensively liberalised through privatisation, foreign investment and the introduction of comprehensive commercial laws and further reforms are planned. A high degree of integration with the EU market makes Hungary an attractive trade and investment partner. Key reasons why foreign investors choose Hungary are the quality of its workforce, its excellent business environment and infrastructure, its central geographic location and relatively low costs. Hungary is progressively adopting broader EU policies, for example in its commitment to promote renewable energy sources.
The Hungarian economy is closely tied to the fortunes of the leading Eurozone economies, especially that of Germany. Almost 75 per cent 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’s 2007 GDP is US$136.4bn.
Currently, Hungary is experiencing difficult economic conditions. An unsustainable budget deficit forced the introduction of severe government spending restrictions and this has lead to a drop in consumer and business confidence. GDP growth slowed to an expected 1,7% in 2007, partly also as a result of poor agricultural conditions in that year, and inflation rose to near 8%, heavily influenced by higher food and energy prices . The Government’s economic austerity measures are already having a beneficial effect, however, with the budget deficit down to 6% of GDP in 2007 compared with 9.2% in the previous year. Hungarian exports remain strong and the foreign trade balance positive.
In early September 2006, Prime Minister Gyurcsány introduced the European Monetary Union Convergence Plan, a series of austerity measures and economic reforms designed to reduce the budget deficit and facilitate Hungary’s eventual entry into the Eurozone. The Hungarian Government has delayed setting a date for the adoption of the Euro until reforms have been completed but most observers do not expect Hungary to enter the Eurozone before 2010-12.
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, the Australian-Hungarian community was estimated to number around 67 000. Hungarian-Australians have been active in the fields of business, academia, politics and the arts and count amongst their number some of the best-known Australian figures, including former NSW Premier, Mr Nick Greiner AC, Mr Frank Lowy AC, Executive Chairman and co-founder of the Westfield Group, and SBS sports commentator, Mr Les Murray AM.
Australia established full diplomatic relations with Hungary in 1972 and both countries have resident diplomatic representation. Australia also maintains an Austrade office in Budapest.
High level visits between Australia and Hungary have further developed bilateral relations. The Hon Alexander Downer MP, then Minister for Foreign Affairs, visited Hungary on 15-16 September 2005. This was the first visit by an Australian Foreign Minister to Hungary since 1989. In Budapest, Mr Downer met Prime Minister Gyurcsány, former Foreign Minister Somogyi (Mr Downer also met current Foreign Minister Dr Kinga Göncz), then Economy and Transport Minister Kóka and then Defence Minister Juhász. 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. In March 2003, the then Minister for Communications, Information Technology and the Arts, Senator the Hon Richard Alston, visited Hungary.
Parliamentary visits have taken place regularly. The Speaker of the Hungarian Parliament, Dr Katalin Szili, visited Australia in November 2002. Dr Ibolya Dávid, leader of the minor opposition party, the Hungarian Democratic Forum, visited Australia in November 2004. From Australia, 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.
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).
Bilateral Economic and Trade Relationship
Since Hungary’s EU accession in 2004, increasing numbers of Australian businesses are exploring Hungary’s potential as a base for their operations in the EU, and especially in the Central/Eastern Europe region. While Hungary is a key trading partner for Australia in the Central European region, the total volume of merchandise trade remains modest. Australian statistics show that total trade was valued at $302m in the 2006-07 financial year, comprising primarily computers and motor vehicle parts. Australia's recent major exports to Hungary have included non-electric engines, motors, and specialised machinery, as well as wool.
The educational sector is an area where both countries have an interest, with an increasing number of Hungarian students choose to study in Australia. Vocational education –in particular- is one of the most attractive choices.
A number of Australian companies are active in the energy sector (see below), including uranium prospecting and renewable energy production.
An important new feature of bilateral trade is the opportunities arising from the two countries’ respective positions in the international supply chain, especially in sectors such as motor vehicle manufacturing, energy and resources exploitation and general engineering.
Australia’s economic relations with Hungary are facilitated through a bilateral Double Taxation Agreement and an Investment Promotion and Protection Agreement.
Trade Successes
Australian companies with investment interest in Hungary include the Macquarie Group, AMP Capital Investors, QBE-Atlasz Insurance, Adina Apartment Hotels, WildHorse Energy, Gloria Jean’s Coffees and Central EU Biofuels. Future Australian commercial activity in Hungary is expected to include sectors such as government-related services (particularly health and e-government), consumer goods, food and beverages, computer and telecommunications software and services, building and construction technologies, education services and tourism. The recent decision by the Hungarian airline, Malev, to join the OneWorld airlines alliance and thus enter into a codeshare arrangement with Qantas is expected to boost tourism exchanges by providing a shorter and faster airlink between Hungary and Australia. Hungary's EU accession offers opportunities to Australian commercial interests in areas such as environmental technologies and solutions.
Last reviewed date: 21/01/2008