The Hungarian economy is a medium-sized, structurally, politically, and institutionally open economy in Central Europe and is part of the EU single market. Like most Eastern European economies, it experienced market liberalisation in the early 1990s as part of a transition away from communism. Today, Hungary is a full member of OECD and the World Trade Organization. OECD was the first international organization to accept Hungary as a full member in 1996, after six years of successful cooperation.
In 2006 Prime Minister Ferenc Gyurcsány was reelected on a platform promising economic "reform without austerity." However, after the elections in April 2006, the Socialist coalition under Prime Minister Ferenc Gyurcsany unveiled a package of austerity measures which were designed to reduce the budget deficit to 3% of GDP by 2008.
Hungary, as a member state of the European Union may seek to adopt the common European currency, the Euro. To achieve this, Hungary would need to fulfill the Maastricht criteria.
Because of the austerity program, the economy of Hungary slowed down in 2007. However, due to many large investments, GDP growth may improve to 2.8-4.0 percent in the second half of 2008. In foreign investments, Hungary has seen a shift from lower-value textile and food industry to investment in luxury vehicle production, renewable energy systems, high-end tourism, and information technology.
The austerity measures introduced by the government are in part an attempt to fulfill the Maastricht-criteria.
The austerity measures include a 2% rise in social security contributions, half of which is paid by employees, and a large increase in the minimum rate of sales tax (levied on food and basic services) from 15 to 20%. While it was widely recognised that something needed to be done, investors have levelled criticism at the program for emphasizing tax increases as opposed to spending
The Hungarian Central Statistical Office reported a decrease in real wages in the first five months of 2007. Gross average income rose by 7%, while net average income increased by 1%. When adjusted for inflation, this corresponded to a 7% decline compared with real wages a year before. The drop was due mainly to the 2006 austerity package; however, state measures to combat the black economy may also have had an impact on pay developments.
Hungary's low employment rate remains a key structural handicap to achieving higher living standards. The government introduced useful measures in the key areas, namely early retirement, disability and old pensions.