Hungarian economy was characterised by a rather strong and viable performance during the last years. From the second half of the 1990s to 2006 Hungary achieved rapid economic growth and its Gross Domestic Product (GDP) was above 4%. Additionally, the ample economic performance of the country was reinforced by the rapid integration into the European markets. It is indicative that the stock of foreign direct investments was almost EUR 59 billion during these years. This fact, associated with the modern export capacities, played a significant role in the positive shift of the national economic structure.  Thus, the economic overall performance of Hungary dramatically altered after 2006 and was further deteriorated after 2008 when the country was hit by the global financial crisis.

The main reason that created the unfavorable economic situation in Hungary was the   sharp decrease in domestic and external demand. The domestic demand was downsized due to the serious downturn of investments and consumption whereas the external demand was decreased because of the recession of advanced economies, such as Germany. The aforementioned situation led to a rapid fall in the Hungarian GDP and a further decrease of employment.

According to the above mentioned developments, the sharp decrease in domestic (due to the serious downturn of investments and consumption) and external demand (because of the recession of advanced economies, especially Germany) leads to a 6-7% fall in Hungarian gross domestic product (which is unseen since the transition crisis) and a further decrease of employment.

The negative economical outlook of the country continued in 2009 as GDP dropped by 6.3%. This downturn is without precedent for the country since the crisis of transformation in the early 90’s and exceeds that of the EU. The negative economic situation was slightly approved as the Hungarian economy performed better than expected in Q1 2010 and GDP rose by 0.1% compared to the corresponding period of the previous year.

The aforementioned unfavorable socio-economical situation had as a result the explosion of unemployment.  It is indicative that in 2009 the unemployment rate jumped near to 10% by early spring. At the start of 2010, the unemployment rate continued unfavourable processes seem to strengthen. According to the latest official data, number of employed continued to fall and unemployment rate surged to a new peak (11.8%) in March 2010.

In order to correct the country’s macroeconomic imbalances, the Hungarian government started a crisis management program harmonized with some long-term objectives in spring 2009. Part of this product is the cut-back on fiscal expenditures (so as to ensure the sustainability of budget deficit target) and the essential tax rearrangements (so as to improve the competitiveness of enterprises). The long term goal of the program is to reach an acceptable growth pace and it remains to be seen if the goal will be fulfilled.