Introduction
Hungary is a country in Eastern Europe that joined the European Union (EU) on 2004, 1st of May. Hungary has continued to be the leading country in attracting foreign investors in Eastern and Central Europe. Hungary is in a favorable state and a better position regarding education, health, income, and lifestyle than other countries in the Better Life Index (World Bank, 2022). Hungary’s top trading partners currently include Germany, Slovak Republic, Italy, Romania, Austria, China, Poland, and the Czech Republic (World Bank, 2022). The country is regarded as a high-income mixed economy, ranked as one of the most complex markets per the Economic Complexity Index. Hungary has a Gross domestic product (GDP) of $182.28 billion and a GDP per capita of $18772.7 (World Bank, 2022). The GDP growth value was 7.1 percent, the unemployment rate was 4.1, and the inflation rate was 5.1 percent as of December 2021 (World Bank, 2022). All these changes in economic growth have been achieved through increased trade dealings and favorable policies linked to EU membership.
Effects of Hungarian Membership in the European Union
Joining European Union has helped improve Hungary’s economy in different ways over the past ten years. The membership provided a competitive advantage for foreign direct investment (FDI) due to increased confidence in the country’s economic and political stability. In 2012, Hungary had a GDP growth rate of -1.26. However, this increased to 7.1 on December 31, 2021, and is expected to improve by the end of 2022. Since 2012, there has only been a negative GDP in 2020, which can be attributed to challenges linked to Covid-19. FDI investment value in 2012 was $10.74B, but it has increased to $170B in 2022 (World Bank, 2022). Hungary commits with other EU members to use finances provided by the body to focus on economic development, transport sector improvement, environmental and energy advancements, social renewal, regional development, and state reform (Egedy et al., 2018). Such devotions have assisted Hungary in improving its infrastructure, trade links, and political stability, which is an advantage for investors and successful economic proliferation.
Third, the cash influx from the EU has enabled Hungary to fortify existing capacities, surpass economic barriers, and create additional job opportunities. As a result, the unemployment rate has reduced from 11 percent in 2012 to 4 percent in 2022 (Carbaugh, 2022). Fourth, the EU has provided a means of forming trade links with 28 member states with benefits such as free labor movement, and increased international customers, capital, and services (Yasmin et al., 2019). The benefits associated with the EU include the reduction of trade barriers, which are non-tariff related, by creating harmonized and simple approaches for trading for the member and non-member states (Csaba, 2022). For example, harmonized value-added tax (VAT) and mutual goods certification processes exist. All these procedures and policies have helped Hungary’s economy to grow over the last ten years.
Suggested Economic Trade Policies
Trade policies are regulations, agreements, and government practices that affect marketing in other countries. The Hungarian economy is marked by robust export and domestic demand; however, incomes are low for employees in many sectors (Vattai, 2019). Therefore, structural reforms such as changes in the education system should be established to maintain and enhance economic growth, reinforce business investments, and ensure a better match for employee skills about market needs. According to Vattai (2019), Hungary is expected to experience a labor shortage due to the aging working population and the mismatch of skills in jobs. In addition, the education system should be updated to meet the rising demand for special and technical skills due to the restructuring of the economy. Another economic trade policy is adopting the euro to attract more FDI investments to the country due to associated advantages, including the simplicity to trade with the EU region (Yasmin et al., 2019). All these approaches can boost trade and Hungary’s future economy.
Conclusion
European Union membership for Hungary was significant for the country and has assisted it in locating other trade partners, boosting its economy, and attracting visitors from different parts of the world. However, Hungary should adopt the euro, like most European countries. Changing their currency to euros would increase trade with countries from the rest of the world. Further, a focus on additional training to replace the aging working population will help the country meet the demand for technical skills in the market.
References
Carbaugh, R. (2022). International economics. 17th Edition. Cengage Learning.
Csaba, L. (2022). Unorthodoxy in Hungary: An illiberal success story.Post-Communist Economies, 34(1), 1–14. Web.
Egedy, T., Kovács, Z., & Szabó, B. (2018). Changing geography of the creative economy in Hungary at the beginning of the 21st century.Hungarian Geographical Bulletin, 67(3), 275-291. Web.
Vattai, T. (2019). Smart policies help Hungary’s MSMEs benefit from the fourth industrial revolution. In International Trade Forum (No. 1, pp. 26-27). International Trade Centre.
World bank (2022). Hungary. Web.
Yasmin, T., El Refae, G. A., & Eletter, S. (2019). Sectoral productivity in Hungarian economy: an input-output linkages approach.Journal of Eastern European and Central Asian Research, 6(2), 344-355. Web.