How did Russian sanctions affect the Hungarian economy?

The natural gas price rose by 300 percent, while the price of electricity grew by 400 percent. The volume of exports grew, yet the balance sheet is negative by EUR 4.9 billion compared to last year. Just like with every country, the war in Ukraine caused a lot of trouble in the overall economic situation. But what are the details? How did sanctions against Russia affect the Hungarian economy?

According to VG.hu, Hungarian exports were growing in the first half of 2022. The problem is that imports also grew drastically. This means that the terms of trade worsened by a large margin this year. Experts say that this is due to rising natural gas and electricity prices. Hungary trades a lot more, but it still imports more than it exports, which has been the trend in 2021 and 2022.

Details

The most significant increase in imports was in the case of natural gas, oil and electricity. The price of these grew by 275 percent and 420 percent respectively. However, there was a significant 150-200 percent rise in prices in terms of instruments, oils, metallurgical products, cereals, vegetables and fruits.

In terms of exports, electronic items made up 28.9 percent and the car industry made up 18.6 percent of the total volume. A significant rise is observable in agricultural products. In this, the agricultural industry grew by 60 percent, animal husbandry by 31.2 percent and the food industry by 25.7 percent. Other industries brought the expected growth rates, only the manufacturing industry experienced a decrease in exports.

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One important thing has to be mentioned: fertilisers. The natural gas shortages made fertiliser production a lot more expensive and it led to a drastic growth in fertiliser prices. Now there is a shortage of fertiliser and a scramble for the remaining supplies. All over Europe, countries experienced immense growth in fertiliser exports.

The direction of trade is still towards the European market, which has grown since the start of the war and it now stands at 76.8 percent. A significant change here was that the United States became one of the top 10 trading partners for Hungary while the United Kingdom got out of this category. The largest trading partner still remains Germany.

Effect of the sanctions on the Hungarian economy

The problem was caused by the decrease in exports towards the Community of Independents Nations. Exports towards Tajikistan decreased by 88.9 percent, 43 percent towards Turkmenistan, 31.1 percent towards Belarus and 23.5 percent towards Russia. A significant portion of exports now cannot reach Russia, which imported a lot of Hungarian products. Despite the drastic fall, this market did not make up a significant portion of Hungarian exports. Of course, there was a drop in the export towards Ukraine too. The drop in exports is not that significant for the Hungarian economy.

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Source: vg.hu