Over the past two decades, Hungary has made important steps toward the building of a market oriented economy that will be competitive and fully integrated into the corpus of the economies of the European Union (EU). During this process, new specialisations patterns have emerged a fact that is mainly highlighted by the fast growing exports of manufactured goods and their shift towards higher skills and quality. Additionally, the country has undergone this period of transition with a relatively high per capita income that reached nearly two-thirds of the EU-25 average.

There are some specific economical cultural and institutional characteristics that someone should take into consideration in order to further understand the political and economical situation of the country. Hungary is a relatively small economy with a population of around 10 million people. Additionally, it has a relatively high level of political centralisation. The reason is that a thriving capital region around Budapest exists. In the contrary the other regions of the country have comparatively high levels of institutional, economical and political disparities a fact that creates inequality in the dispersal of knowledge institutions and industrial facilities. Finally, Hungary has a long history of excellence in science something that has been reaffirmed during the last years as many Hungarian scientists have gone beyond the borders and made significant contributions to expanding their domain of scientific specialisation.

Furthermore, the national economy of Hungary has obtained a relatively high degree of openness. Within a small period of time Hungary has become one of the world's most internationalised economies and has attracted a sizeable amount of Foreign Direct Investment (FDI) as the cumulative foreign direct investment is totaling more than $60 billion since 1989.

Additionally, the country has improved its institutional framework for innovation. The compliance of the country with the European acquis communautaire has helped innovation and has already created a significant innovative boost to the country's industrial base. Under this context, a solid legal structure for technology and innovation has been established and major institutions have been created. Of course, we should always keep in mind that good framework is a necessary precondition but not sufficient in order for a country to perform well in the aforementioned domain. Political acknowledge of the importance of innovation has to be further understood and political will for the perpetual development of it should be guaranteed. The existence of organisations such as the Office for Research and Technology (http://www.nkth.gov.hu/english) and Hungarian Scientific Research Fund (http://www.otka.hu/?akt_menu=991&set_lang=991) is an excellent foretoken that the development that has been achieved until now will be sustainable.

As it is already mentioned the industrial activities of the country is centralized geographically. The centralisation, though, also applies to the company's size as there is a lack of a strong segment of innovative SMEs. Additionally, much of the SME records low productivity, entrepreneurial and innovative capabilities.

Furthermore, the privatisation process has been constant after the fall of the communist regime. This has as a result that the private sector nowadays accounts for more than 80% of GDP. This actually means that the competitiveness of the Hungarian economy is mainly based on the competitiveness of the enterprises. Thus, it is normal that the Hungarian government is trying to create a competitive environment for the promotion of national and foreign investments. Under this context the Hungarian government is trying to attain the reform of the existing tax system and the reduction of the bureaucratic burdens.

The aforementioned economic growth has been unceasing until the global economic recession of last year that has hit Hungary hard. Thus, a small portion of the problem for Hungary started earlier and has to do with the fact that the country borrowed large amount of money from the International Money Fund (IMF) during 2006 and 2007 in order to run large current account deficits. The current account deficit became more problematic during the recent economic slowdown as foreign capital inflows dried up and the private sector balance sheets were also hit hard. The reason was that the government had to depreciate the domestic currency in order to face the problems created and since the private sector had borrowed heavily in Euros, it found itself in a critical condition. Consequently, the aforementioned economic situation created a vicious circus for the Hungarian economy that resulted in a negative growth rate of about -1.5% to -2.5% in 2009.

Summarising, we can say that this was the economical and political situation of the recent past, namely after the fall of the communist regime, in Hungary. The Hungarian economy has been trying to reinvest its internal political and economical structures in order to become a functional market economy and has largely succeeded. Unfortunately, the recent economic recession had a serious negative effect in it and it is remained to be seen if the Hungarian economy will be able to retaliate from it.