Central Europe Activ

Hungary has had the lowest economic growth among Visegrad and Baltic countries in the past years. The only sector that sees a recovery in this year’s high food prices is the agriculture. The grain producing area has increased by 2% since 2007, but output is up by a staggering 42%.

Hungarian grain field near FertörákosThe rise is partly due to the catastrophic weather conditions in 2007 – Hungary as a landlocked countries is one of the most hit ones by global warming and lack of water. The output level is 26% higher than the 5-year average, too. This may lead to a significant income growth in the sector as agricultural plant prices are 8,1% higher than last year. Although meat prices soared by 17,6% the number of livestock has stagnated or even decreased, showing a lack of competitiveness in industrial farming (and also a higher base as the 2007 weather conditions did not effect animals that had access to drinking water).

It is worth noting that Hungary’s unpopular prime minister, Mr. Gyurcsány was very heavily criticized in Hungary when he suggested in Davos that the current high food prices would make a great opportunity to scrap agriculture subsidisies in Europe, which still make up the relative majority of the common budget.

Will Hungary and the EU profit from this year’s good harvest? Not so much. Hungary, in contrast with many Central European countries, is not an agriculture-oriented country, the share of agriculture is below 5% in the GDP. The country was especially hit by extremely high oil and natural gas prices as a heavy-industry, energy-intensive economy. Hungary’s main sector, the industry is stagnating, although it produced around 8-10% annualized growth rates in the past years. Regarding the EU, however big surpluses we may have in some years, the failiure of the Doha trade talks make it very difficult to place this on the world market. Their may be a global food shortage, but we lack a global market for food, which is a loose-loose situation for the EU and the rest of the world. One of the chief causes is the EU’s notorious agriculture subsidy regime.

CC image: onkel_wart (The image was taken near Fertörákos, the Hungarian village in the post-Schengen dispute with its neighbour, Mörbisch)

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Comments

  1. What is so striking about this: Everyone acknowledges that the EU has to change its subsidy regime, because this would in the short and medium term favour all countries, Hungary included.

    But it’s easier for the EU to ban cigarettes from public places than to cut tobacco subsidies. One of the many paradoxes of our European polity…

  2. What is more annoying that it is much easier to change a redistributive policy in a boom than in a depression. Since the agricultural producers are in an extremely favorable income position, this would be the best timing for reform. Once the prices will be down, it will be politically impossible to cut subsidies.

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