DP371 Tax Reform, Trade Liberalisation and Industrial Restructuring in Hungary

Author(s): David M G Newbery
Publication Date: February 1990
Keyword(s): Economic Development, Economic Reform, Foreign Debt, Hungary, Taxation
JEL(s): 112, 124, 323, 443
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=371

The two central economic problems facing Hungary are its large foreign debt and its relatively poor rate of growth over the 1980s. The paper examines some of the reform issues facing Hungary, starting with the tax reforms of 1988 and 1989, but concentrating on the importance of creating competitive conditions in product and factor markets as a precondition for success of other reforms. International trade could play a key role, but liberalization is constrained by the contractual nature of trade with other Eastern Bloc countries through the CMEA, and by the large overhang of hard currency debt. Issues of capital market reform and privatization are briefly discussed.