Regional specialisation in a transition country - Hungary

high employment areas are running out of labour reserves, expansion has not shifted to
the areas with lower labour force utilisation. Of the relatively disadvantageous areas,
Észak-Alfold joining to the Central region, seems to be the only area catching up with
the employment grown of the more advantageous areas.

A special consequence of the transition into market economy in Hungary is that -
in spite of the steadily decreasing rate of unemployment - the differences between
certain regions have not shrank considerably. The rate of unemployment is still the
smallest in Central (5.4%) and Western Transdanubia (4.5%) and the biggest in
Northern Hungary (11.5%).

The importance of the economic growth and the closing up, which started in the
second half of the decade, is highlighted by the fact that the growth was accompanied
by balance in macro economy and stability in micro economy. The growth of economy
since 1997 has been firm, the Hungarian economy has reached a growth rate of 4.5-5%
every year. Investments, especially by venture capital grew fast. Parallel with the
export-driven economic boom, the cycle of investments is more and more synchronised
with the economic cycles of the main - primarily European - markets.

Domestic consumption has also become a major contributor to the economic
growth. Since 1997 the real wages have been rising yet, the rate of increase in them still
falls behind the rate of growth in productivity. It is important to mention that the rate of
increase in productivity has been improving by 3% annually on the average since the
beginning of the 1990’s. If it goes on like this the economy will be able to sustain even
an annual growth rate of 5-6%. From the point of view of domestic market growth,
having been utterly strengthening in the past few years, consumers’ trust is very
important.

The internal organisation of the regions as a new and upgrading resource - gains
a special importance in this transitional period of the Hungarian economy. The
development of the Hungarian economy at the end of the millennium reached a turning
point from many points of view.

- Firstly, Hungary is now entering the post-privation phase of capital investments in
which instead of the direct investment of employed capital the expansion and
deepening in production and co-operation came into the forefront, which requires a
higher contribution of services.

- Another important challenge is the dual character of the Hungarian economy: the
sector of the strongly export-oriented companies decisively in the foreign-ownership

C:anyuwork/ace/ersa/paper01.07.2412:14

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