The agri-food sector in Hungary experienced very mixed results since its entry into the European Union. However, if Hungary used to be Europe’s breadbasket, today agriculture and the agri-food sector play only a very small role in its economy, which has become very dependent on foreign trade.
Accession to the EU, before and after
In the 1970-1980s, Hungary was a very competitive country in terms of food production, on the one hand through its natural resources favoring agriculture, and secondly through the establishment of a policy along the lines of the food industry. The financial situation of the country deteriorated due to the failure to open its economy to the outside, Hungary had therefore no choice but to stake everything on food, including exporting to Russia and other CMEA (Council for Mutual Economic Assistance) member countries to which it exported ⅓ of its agricultural production. Following these measures, as well as the implementation of standards and regulations inherent in its entry into the EU, Hungary switched economic partners for the benefit of members of the EU such as Germany (15 % of agribusiness exports), Romania (14%) and Italy (10%). Besides, Hungary had to confront to its own consumers becoming increasingly difficult to satisfy. Indeed, the Hungarian avoid to importing outside the framework of the EU trading agreements, and thus avoid any additional charges. Similarly, GMOs are prohibited and won’t be exported to Hungary. Today Hungary is considered as a small but open economy, but is struggling to find its place in the overall balance.
Dependence on FDI
Indeed, following the withdrawal of a large number of foreign investors, Hungary is left behind and confronted to a decline in exports. Being no longer independent economically, the country thus had to change its strategy. Indeed, since the 2008 crisis that struck the country, Hungary depends greatly on the outside to maintain its finances. It imports 25% of its food, a share that keeps on growing and is reaching a critical threshold. Therefore, the food industry had to be boosted and today reappears numbers up: exports increased by 9.2% between 2008 and 2012 and the share of the food industry in total exports rifes 9.7 %, which corresponds to 5 922 million euros. The role of foreign investors is not to be avoided since they happen to hold more than 50% of the food industry, and it is their departure caused by the crisis that cut the branch of its best assets. However, Hungary is struggling to regain its competitiveness of the 70-80s, as the country was deprived of its best partners of the past , namely the Czech Republic, Slovakia and Poland.
However, there is still some hope: Hungary gradually began to consider other markets such as Croatia, Serbia or Cyprus. Nevertheless, this will require Hungary to restore a balance within its industry to regain lost competitiveness.