Lean Times Ahead in Hungary

With 30 percent inflation, some look wistfully at communist system

IN Budapest's sprawling Central Market, shoppers jostle past vending counters heaped with fine cuts of meat, fresh vegetables, canned goods, and imported luxury products. But for many Hungarians, these first fruits of democracy and a free-market economy are still out of reach.

``I just come here to look,'' says Juliana Szanto, a retired shop clerk. ``That's about all I can afford on my pension.''

Janos Tamas, another elderly shopper, agreed. ``The cheapest of the cheap is what I always buy,'' Mr. Tamas said, holding up a plastic bag containing two packages of margarine.

Although Hungary leads most of its East European neighbors in dismantling its communist economy, the changes have not come without considerable hardship.

Hungary's $21 billion foreign debt, now the highest per capita in Eastern Europe, continues to slow economic reforms. Interest alone on the debt amounts to $1.2 billion a year, or about 10 percent of the national budget.

Austerity measures imposed in exchange for International Monetary Fund (IMF) support this year have left the government with few resources to help the needy. The measures made Hungary eligible for a crucial $2 billion aid package from the IMF.

The magnitude of the problems accompanying the economic transition prompted Prime Minister Jozsef Antall to warn Hungarians that 1991 would ``be a year of grave tribulation.''

Pensioners and others on fixed incomes suffer the most, because benefit increases have not kept pace with inflation, which peaked at 30 percent last year. Economists predict the rate could surpass 35 percent to 40 percent this year.

Following a decisive victory in the 1990 elections, Mr. Antall's government is being held increasingly to blame for the hardships caused by its economic reform policies.

Although some sectors are booming and a wealthy class of entrepreneurs is slowly emerging, government statistics describe an economy that is shrinking as the reforms take hold. The dissolution of Comecon, the Soviet-led trading bloc, and the war in the Gulf have also made Hungary increasingly vulnerable.

Hungarian products must now compete in a unprotected market. Even slight increases in the price of oil can mean whopping growth in costs. The Hungarian government estimates that each dollar increase in the price of oil costs it an additional $100 million in expenditures.

ACCORDING to recently released Finance Ministry figures, the nation's gross domestic product dropped 5 percent last year. Real wages declined by nearly 9 percent, dropping to levels of the early 1970s, while retail trade turnover fell 16 percent compared to 1989.

But there are bright sides to the reforms. While big industry is having a terrible time, studies indicate that output of companies with fewer than 50 people has increased by nearly 200 percent, a good indicator of entrepreneurship taking hold. Exports to hard currency markets also grew by 17 percent, slowly replacing crumbling trade with troubled Comecon partners.

Antall's government has also approved an ambitious privatization program. Under the plan, more than 150 big state industries are to be sold over the next year. The government predicts that within four years private enterprise should account for more than half the economy, compared to barely 20 percent now.

But the next few years are certain to be difficult for thousands of Hungarians struggling to make the adjustment. So far, 90,000 people have lost their jobs. That figure is expected to swell to well over 300,000 of the 4.6 million work force as inefficient and insolvent industries are shut down, unable to continue without generous subsidies. Government officials have predicted a sharp increase in the nation's homeless, currently estimated at 50,000.

Loss of government subsidies and a major drought last summer have also hurt Hungary's agricultural sector and helped to drive up prices.

That means frugal times for Mrs. Szanto, who together with her husband receives retirement benefits of 11,000 forints ($150) a month. While that sum is nearly 2,000 forints more than the average net income of 9,300 forints, it doesn't go far at many booths at the Central Market. At most meat vendors, one kilo (2.2. pounds) of sausage sells for 700 forints. A kilo of good coffee costs 400 forints.

Such prices are beginning to make Szanto wonder whether it's all been worth it. ``If this keeps up much longer, I'm going to start missing the old system.''

Government officials plead for patience. Says one high-ranking Trade Ministry official: ``We need to perform a miracle. But for a miracle to happen, people have to believe in it.''

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