Openness to foreign direct investment. By 1990, Hungary had attracted half of the foreign investment coming to Eastern Europe: $5 billion. Favorable tax regime, streamlined bureaucracy and new legislation permitting fully owned subsidiaries help to attract international business.
Weaknesses
Continued lending by the banks to state-run and private firms regardless of creditworthiness has led to a crisis in the banking system. No plans to privatize banks. Downturn in overseas investment slowing privatization program.
Profile
The costs of Hungary's transition to a market economy have been higher than expected. The collapse of COMECON trade caused a reorientation of trade toward Western Europe, and Hungary's economic recovery now depends largely upon trade with the EU. High tax rates make privatized assets less attractive to foreign investors.
