Hungarian Agricultural Economy Today: Risks and Opportunities

Kapronczai, István

Keywords: GDP, employment, fixed assets, investments, loans, grants, foreign trade, food consumption, Q10, Q13

The study aims to create a detailed and objective analysis of Hungarian agriculture. It focuses on the reasons behind the present situation in the sector and suggests expected trends as well as drawing attention to decisions that need to be made.
Hungary’s agriculture has suffered a drastic fall in its position in world food production in the last two and a half decades, its share falling by 50%. Hungary does not make use of its agricultural capabilities. Its role in the national economy, and main macroeconomic indicators fit into the European norm. The share of agricultural production in the gross domestic product (GDP) is 3%. However, the fact that the food industry’s share of the GDP is just 2%, indicates that there are structural problems within the agribusiness and that food processing has fallen behind.
In Hungary, the land market and land rental market function separately, at times even conveying opposing effects to the producers and owners. Due to the ownership structure and the status of landowners, the size of the rented area is larger than in Western Europe, as it constitutes more than half of the total agricultural land in the country. In the recent period in Hungary there has been a marked reduction in land supply and increase in demand for land, and these changes have caused a rise in the land lease tariffs (that have also been encouraged by area-based subsidies).
Irrigation development is a strategic issue, as the current situation is unsustainable. Only 2% of the land is irrigated, compared to 9% on average in the European Union, and 20% on average world-wide (with differences in climate).
While the measuring of employment is one of the most uncertain elements in statistics, research based on different methodologies has indicated a growing demand for agricultural labour in the period between 2010 and 2015. However, this process is not due to the growth in the production of the industry or the growth in market-based employment, but much rather on the “public work” programme.
International experience shows that the countries that were actively engaged in agricultural innovation and had a high level of research and development were the same countries that were able to live up to the world economic challenges of the past decades. Innovation is influenced by the use of consultants, training, higher education and agricultural research, the levels of which along with the allocated funds need to be raised.
The research data show that the last 3-4 years have been exceptionally fortunate for agriculture, and the good economic climate should be used to aid development that will boost Hungary’s competitiveness. Relatively high prices and EU support have strengthened the financial position of farms, there are significant savings, the area-based subsidies are favourable in rural development. Moreover, lending rates are low. Thus the requirements needed for an intensive investment cycle are there. The sources, however, can only be mobilised if these can be linked to the promise of long-term stability of agricultural policy.