In a generally upbeat economy, Hungary’s performance would not necessarily stand out, but it does in the present climate. Growth along with declining debt – the clearest sign that economic expansion is based on real output, not loans – is more impressive than most economies in the European Union. And it has been a while since Hungary ranked among the top-tier European economies in GDP growth.
In the first decade after the regime change in 1990, Hungary was cited as one of the top performing economies in the former eastern bloc, this growth was fueled by an unsustainable process of privatization – selling state-owned property and assets to much stronger, western competitors, at fire-sale prices and with few concessions. The first Orbán Government (1998-2002) could only do so much to stop this trend between Socialist-led governments and that was not enough.
Privatization did have one undeniably positive effect: by 2002, state debt declined to well below 60 percent of GDP. However, when the Socialist-led governments returned in the 2000s, they had nothing left to sell and began taking loans again. In eight, short years (2002-2010), they drove the debt-to-GDP ratio back above 80 percent. Hungary gained little from Europe’s upbeat economic trends prior to the 2008 financial crisis.
Economists refer to this period as Hungary’s lost decade, bringing the country to the brink of bankruptcy in 2008 and compelled to turn to the EU and IMF for an emergency bailout loan. Before their was a Greek crisis, there was a Hungarian crisis.
The latest economic growth figures have put Hungary back in Europe’s leader circle. But this time, it’s not because we’ve been selling the family silver or taking loans, and it’s one of the most important indicators that the economic reforms of the Second Orbán Government – remember unorthodox? – are working.
More than 700 thousand jobs have been created. Taxes on labor and business profits have been significantly reduced, and the country is seeing new investment records. With a good measure of fiscal discipline, that translates into low budget deficits and growth.
The fact that the Hungarian economy is finally one where economic growth meets fiscal responsibility is important for us not just because it puts our country among Europe’s top performers but also because this is the first time since the regime change of 1990 that Hungarians experience real and sustainable growth. After the lost decade, we’re calling the 2010s the decade of Hungary’s real economic recovery.