The Hungarian economy in the European Union. Catching up, losing one's way, going it alone on the EU's periphery

Gulácsi, Gábor ; Kerényi, Ádám

The Hungarian economy in the European Union. Catching up, losing one's way, going it alone on the EU's periphery

Hungary joined the European Union in 2004 as part of the first wave of the EU’s eastern enlargement. Even in the late 1990s, the prospect of EU accession contributed to Hungary’s rapid recovery from the deep transformation crisis. During its time as a member state, the country’s level of economic development has significantly converged with that of the EU’s more advanced member states.

However, according to two fundamental EU benchmarks for comparing member states' economic progress, Hungary’s convergence performance lags behind that of most Central and Eastern European countries that joined the EU in 2004 (hereinafter: EU11 countries). Several of these countries have not only caught up with but also surpassed Hungary in key performance indicators.

In this study, we begin with an international comparative statistical analysis to highlight the common driving forces behind the EU11 countries' convergence with the EU, as well as the key data illustrating Hungary’s relative decline in position. We then examine the specific characteristics of Hungary’s convergence process and, finally, propose hypotheses to explain the country-specific reasons for Hungary’s setback within the EU11 group.

In this section, our analysis narrows its focus to the Hungarian economy. We seek to answer what path dependencies and power struggles played a role in the governance crises between 2001 and 2010 and how, after 2010, Hungary’s political system (the Orbán regime) charted an alternative course, pushing the country to the margins of the European Union.