In 1948 Hungary lost its sovereignty when the communist party took exclusive power, backed by the USSR. In 1968 the command economy was partially liberalised, distinguishing Hungary from neighbouring communist countries. A peaceful transition to multi-party democracy was achieved in 1989 when the communist party agreed to give up its power. Free elections were held in March 1990, the year that Hungary became a member of the Council of Europe. Although earlier liberalisation in Hungary allowed a more gradual approach to economic reform, the transition still proved challenging. In 1991, GDP fell by around 12% and did not regain growth until 1994; inflation peaked at 35%. Real wages in 1997 were 76% of the 1989 level. With the increase in foreign investment, however, and a programme of stabilisation, GDP began to grow. By 1998 unemployment had fallen, inflation had reduced and real wages had increased.¹⁵⁷

In Hungary, GDP per capita is Intl $ 15,826. This falls within the range of $3,845 (Bosnia-Herzegovina) and $20,326 (Slovenia) in the countries of Central and Eastern Europe (see Table 7).¹⁵⁸

Table 7: GDP per capita (Intl $): countries of Central and Eastern Europe, 2004

Source: WHO World Health Report 2006