No. 60, János Gács (2000): Alternative scenarios for Hungary’s accession and macroeconomic development

As ten transition countries prepare for membership in the European Union (EU), it is evident that incumbent members, particularly the most affected border states, are concerned with the likely impacts of the accession process on themselves. Precisely this interest has given rise to a comprehensive international research project known as PREPARITY, which is sponsored by the European Commission’s INTERREG II C initiative. It is a collaborative research project between German, Italian, and Austrian research institutes.Out of the 16 sub-projects of PREPARITY, the second in line was finished in late 1999 and its summary study published as Gács J. (Ed.), Macroeconomic Developments in the Candidate Countries with Respect to the Accession Process, December 1999, IIASA-WIFO-PREPARITY. The work was commissioned by the Austrian Institute of Economic Research (WIFO), and prepared by an international research team at the International Institute for Applied Systems Analysis (IIASA) in Laxenburg, Austria. Several country studies were elaborated to be used for the summary study and the present paper is the Hungarian country study. The aim of the research in the Hungarian study was to investigate likely macroeconomic developments in Hungary through 2010, based on two distinct scenarios: one that assumes accession for Hungary to the EU in 2005, and another that assumes that the country will not accede to the EU before 2010 (the status quo scenario). In order to substantiate the prospects for economic performance in Hungary, section 1 of the paper presents the specificities and main patterns of macroeconomic development in Hungary since the start of the transition. Section 2 is devoted to the analysis of the existing calculations for Hungary’s potential growth in the long run as well as to the likely development of the main factors of growth in Hungary. In order to delineate the framework of the projections section 3 deals with two crucial topics: the characteristics of foreign economic relations and savings. The next section begins with the general evaluation of the likely impacts of accession on the Central and East European Countries (CEECs) as new EU members and goes on presenting the scenario projections for Hungary. Finally, section 5 summarizes the results of the study.

Project leader:
János Gács