Economic Prospects in Hungary: The Rise of The Private Sector |
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| Authors: | Paul Hare |
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| Institution: | Professor of Economics and Director of the Centre for Economic Reform and Transformation at Heriot-Watt University, and a Senior Researcher at the Centre for Economic Performance, LSE. He writes extensively on issues of economic policy and reform in central and eastern Europe, and edits a new journal on the area, Economics of Transition. The research for this paper was carried out with the help of a grant from the ESRC under the E-W Initiative (Contract No. Y3009 25 3007), for which the author is very grateful. Much of the data used in the paper was compiled by Anna Canning, whose assistance was greatly appreciated. |
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| Abstract: | After introducing many market-oriented reforms during the 1980s, Hungary was in a good position to move rapidly towards a market-type economy after 1989. Because of trade shocks and restraint on domestic demand, Hungary suffered similar falls in output to other countries in eastern Europe. But it encouraged start-ups of new firms, welcomed foreign investment and undertook an active programme of privatisation. After some initial experience with uncontrolled privatisation, the State Property Agency was set up to supervise the process. At first it operated in a very centralised way, but more recently it has seen the need to operate in a decentralised manner. To manage those firms which will remain in state hands for some years, the State Assets Management Company was recently established. Overall, the combination of new start-ups and privatisation of state-owned firms is rapidly creating a more dynamic economy, which should soon start to grow out of the present recession. |
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