With the end of the century approaching, casting an account and drawing up a vision of the future at the same time present a major challenge to economic research in general and to the ECOSTAT in particular. In the present study, answers are sought, based on the situation of Hungary and the chances available for her, to the following questions:

• the development of science and technology during the first few decades of the 21^st century and the associated economic and social challenges will they present for Hungary;

• economic development during the above-mentioned period, the changes of the role of the sectors of the economy and their consequences for Hungary;

• changes in the global raw material and energy supply during the forthcoming decades, and its consequences;

• changes of the global demographic situation and their consequences for Hungary;

• the relationship between economic development and the environment and the role of environmental protection during the forthcoming decades;

• the development of globalisation and regionalism, and its consequences;

• the transformation of the European Union and the chances this offers for Hungary;

• the social problems the country will need to face during the forthcoming decades;

• finally, the related consequences of each of the above factors on the development of the Hungarian economy and society both on the long run and during the forthcoming years.

For the purposes of this analysis, we have assumed that, instead of revolutionary new discoveries in terms of scientific and technological advancement, the initial decades of the next century are to be characterised by the existing technological know-how gaining ground, contributing to economic growth and improving the standard of living. The development, however, will no doubt remain unsteady and varying by country.

One of the most important features of the foreseeable scientific and technological development is the formation of the information society. The number of jobs has expanded primarily in the industries specialising in the processing of information and/or requiring a wide range of computer skills. Remote jobs are on the increase and a new type of - global - community emerges of groups of people with similar interests.

In developed countries, average economic growth (expressed in per capita GDP) will be around 2 percent annually during the forthcoming decades. Given the suitable conditions, however, the development of the moderately developed Central European countries to integrate into the European Union may be considerably more dynamic than that. As far as Hungary is concerned, an annual 4-5 percent growth of per capita GDP appears a realistic objective for the next one or two decades. At such rate of growth, Hungary may reach the average present-day level of development of the European Union, currently represented by Italy or Germany, during the period 2020-2025.

In the past decades, the significant constituents of the growth of the global economy have included the fast development of international trade, with transnational companies gaining an increasing importance. The rate of the expansion of global trade may be expected to continue to considerably - by app. 1.5-2 times - exceed that of the increase of the GDP. This tendency will also affect Hungary, even reinforced by the country’s accession into the European Union.

The structure of the global economy has changed substantially during the past decades. While low-income countries are dominated by agriculture and industry, medium-income countries have a higher proportion of services, with about two-thirds of the jobs and the GDP derived from services in high-income ones. Except for the high proportion of agriculture, the macro-structure of the Hungarian economy is essentially similar to that of the developed countries. Therefore, future changes, primarily a development of quality, may be expected within the individual industries rather than in the macro-structure (although the proportion of the agriculture and of services is to drop and increase respectively).

The danger of the depletion of the global raw material and the energy resources is not expected to occur during the forthcoming decades. One of the reasons for this is the meagre increase of the global raw material and energy demand since the first crude oil price boom. Hungary’s raw material and energy supply is to remain stable in the future, despite of the expected relative inflation of crude oil prices.

The global demographic problems, including overpopulation in the developing world whereas the decrease of the population in developed countries, are not expected to abate during the forthcoming years. In addition, the demographic pressure on developed countries is anticipated to grow with the increase of the number of economic refugees. In that respect, Hungary will probably share the problems of developed countries.

The forthcoming decades will probably see an increasing international co-operation with a view to the protection of the environment. In terms of meeting the environmental requirements, Hungary has, from many respects, failed to reach even the level of medium-income countries. Therefore, the protection of the environment, one of the conditions of the country’s membership of the European Union, will have to become a priority in the policy of economic development during the forthcoming decades.

The authors treat the trends of globalisation, having become particularly powerful during the last third of the 20^th century, as a law of the economy whose significance could be likened to that of the industrial revolution. Economic policy will therefore need to develop adoption mechanisms to enable that the country benefits from the process.

The establishment and gaining ground of the European Union have changed the look of the European economy considerably during the final third of the 20^th century. The Agenda 2000-2006 envisages a substantial enlargement and the all-round reform of the European Union. Of the countries under transformation, Hungary has been the first to begin her accession efforts. Consequently, the country’s integration objectives may be reached within the forthcoming 3-4 years. This view is supported by the fact that at the latest conference of the Commission of the EU, held in Helsinki, the Prime Ministers agreed that, carrying through the institutional reforms, the Union must be prepared for the accession of the new members.

The membership of the European Union may hold several benefits for Hungary:

• becoming part of a market of several hundred million consumers and the international division of labour, with an improved chance for the comparative advantages of the economy to be exploited. Thus, the national economy may take a new and efficient course on the long run;

• the Hungarian agriculture may obtain the protective shield of the agricultural protectionism of the EU, an important element of the resolution of the crisis of the current crisis of the agriculture. The advantages brought about by the favourable conditions of Hungarian agriculture may be exploited through the agricultural specialisation within the EU;

• important features of the common economic policy of the EU include the support of the catching up of the less developed members, with considerable material and spiritual resources made available for the purpose;

• there may arise a possibility for the free movement of capital, resulting in the importing of capital becoming easier and safer for investors;

• the implementation of the EU norms and practices at a number of fields of life (education, health care, border defence, anti-Mafia efforts, environmental protection, etc.) could help bring about the modernisation of the Hungarian economy and society.

Special mention must be made of the security-related benefits of the accession. Along with her NATO membership, Hungary will obtain a double security shield, the EU having declared that it intends to create a defensive striking power sufficient to address the required security-related challenges either with or without the NATO.

Of the first-wave countries, Hungary has, according to the experts of the EU, achieved good results in the preparatory process, granted the opportunity of being among the first countries to access the Union. When evaluating the expected positive consequences, however, one needs to take into account the issues to be addressed before the EU membership is gained. Among others, these include the following:

• further reforms are required in health, the pension system, in administration, environmental protection and the labour market. The establishment of a EU-conform agricultural institutional system is also called for;

• the improvement of the situation of the poor and of the Gypsy minority, increasing the efforts in order to reduce unemployment;

•  bringing environmental protection up to the level of European standards.

The past ten years have seen a historic transformation in Hungary, coupled with a profound transformation-related crisis. The changes have brought about the establishment of market economy and the consequent societal differentiation. By 1999, the transformational crisis essentially ended. Privatisation has been completed, a sustainable course of development established, with both inflation and the budgetary deficit reduced. These processes have been occurring at a reduced influence of the government on the economy.

The long-term conditions of a lasting economic growth are favourable. The country’s accession into the European Union may give a huge added impetus to this growth. The sustained course of development, at a relatively high rate of accumulation, is to remain export-oriented. Export efficiency is supported by the growth of productivity, one of whose sources is to remain low labour costs in Hungary.

Considering the chances for economic growth, an important requirement is that domestic consumption should ‘come to’, one of its conditions being the sufficient rate of the increase of the real wages.

Switching to the new course of growth will require the further structural transformation of the economy, bringing about considerable changes in the proportion in the GDP of the various production and service industries. (The weight of the agricultural sector is to drop whereas that of services and knowledge-intensive industrial activities is to increase.)

During the past decade, foreign operating capital has obtained a major stabilising role in the Hungarian economy by contributing to the financing of the international trade deficit, among others. Through the modern technology it has established, it created jobs, helped efforts for the export-oriented economy, as well as contributed new elements to corporate organisation and management. At the same time, it has also created a ‘double economy’ in the country that may be quantified according to the size of the gap between the level of the GDP and the GNI, besides increasing the exposure of the national economy to international business trends. Economic policy has to make an effort in order that the development of Hungarian-owned companies should approach that of multinational corporations, having managed to achieve dynamic growth. Therefore, domestic companies should attempt to successfully integrate into the business of these large companies, expanding their domestic supplier base.

The scientific and technological development is critical in order that the new development course is achieved. The country is still considerable behind in this respect, with the so-called restoration or consolidation period still unfinished in this field.

The influence of the R &D activity on the investments is currently not reflected appropriately in terms of the creation of high-tech industries. Presently, high-technology industries represent 15 percent of the overall economy, with their diffusion effect not yet reaching over sufficiently to other areas, and therefore constituting islands in the present-day Hungarian economy. In the future, this process will need to be reinforced through the appropriate system of incentives, another important requirement being the need to stop any further erosion of the domestic research base and providing an existentially sound personal vision for the researchers.

When preparing for the coming decades, the attention should be called to the social problems that may cause collisions among the various social groups, preventing the social cohesion that has, in human history, proved essential for social advancement. A particular concern is the substantial differentiation of income (the proportion of the income of the bottom and top tenth, for example, having nearly doubled during the past decade). A similar problem is presented by the decrease and the ageing of the population, putting increasing burden on the social provision systems.

During the immediately forthcoming years, the stabilising course of the economy, taken in the past years, may be expected to continue, with a relatively fast economic growth to be anticipated, possibly further accelerating from 2000, reaching 5 percent by 2002.

Economic growth should stay export-oriented during the coming years. Thus, a 11-13 percent increase of the volume of foreign trade appears likely.

Although economic growth may improve the employment situation, its rate of improvement will not reach that of the growth of the GDP, probably only achieving an annual level of 2-3 percent, due to the further improvement of productivity.

The stable financial situation and the economic development will offer some opportunity for the reduction of inflation, to decrease to about 5 percent by 2002, despite the increase of export prices and a slight decrease of the gap between the prices of industrial and agricultural products. This situation enables the modification of the exchange rate policy, i.e. the discontinuance of the sliding devaluation of the forint.

The above-mentioned development course - deemed realistic by the authors, in terms of the macro-economic indicators, could enable the country, by 2002-2003, to become a member of the European Union.

The table below sums up the characteristics of this long-term course of growth.