The Central European country of Hungary is a fairly small nation that has had high rates of poverty in the past. In 2007, 29.4% of Hungarians were at risk of poverty and that number rose to 34.8% in 2013. Despite these high poverty risk rates, the country has had success in reduction. The poverty risk rate reduced down to 18.9% in 2019. Hungary’s improving economy is fueled by new policies and support from other nations.
Increasing Consumer Spending
Part of the reason Hungary has struggled to develop a productive economy dates back to the 1990s after the fall of the Soviet Union. Hungary implemented many reforms such as the privatization of businesses that were once state-owned. Hungary began to cut funding to social programs as well. Despite living conditions deteriorating, Hungary was able to improve these conditions with its policy implementations and growing exports. Since then, Hungary has adopted a multitude of policies to help improve its economy.
Before the 2018 election, the country tried to increase its amount of consumer spending by implementing an increase in the minimum wage. Hungary’s government also reduced income tax by 1%. The Hungarian government implemented these strategies to encourage Hungarian citizens to put money back into the economy and keep Hungarian businesses operating.
European Commission Support
When COVID-19 swept the globe, many nations had to implement lockdown measures to protect their citizens and stop the spread of the virus. Because of Hungary’s struggling economy, the nation required financial assistance from the European Commission. In 2020, support came in the form of €1 billion. The monetary assistance aimed to provide Hungarian companies the help they needed to survive during COVID-19. The assistance applied to all companies — micro, small, medium and large. Certain businesses have a cap on how much of this aid they can access. Monetary support of up to €100,000 is available to businesses working in the agricultural production sector whereas up to €120,000 is available to businesses working in the fishery and aquaculture sector. The assistance excludes companies that were already in economic hardship on December 31, 2019. The monetary assistance ensures that Hungary’s improving economy does not lose progress due to COVID-19.
Due to policies that were implemented by Hungary’s government and support from the European Commission, Hungary’s improving economy has not been as harshly damaged. However, despite this assistance, the GDP of Hungary has still suffered just as other global GDPs have suffered. But, the future of Hungary’s economy is not as bleak as it may seem. It is expected that the GDP of the nation will grow by 3.5% in 2021, and by 2022, the economy is expected to return to the level it was at prior to COVID-19. While Hungary’s economy is far from perfect, it has no doubt made substantial improvements in recent years.
– Jacob E. Lee