The Impacts Of The Great Depression 1929-33 On Hungary’s Economy
Abstract
The Great Depression of 1929-33 had serious consequences on Hungary’s economy. The Central and Eastern European countries, including Hungary were hit severely by the downturn of the wholesale prices as regards of agricultural products in international markets. Besides declining prices another major problem was that the industrialised countries introduced protectionist measures (customs duties and quotas). As a result of this process, market opportunities were constrained and later ceased to exist. The situation was further aggravated by the fact that the unfavourable gap between agrarian and industrial prices further widened in the 1920s.
Although the crisis started to emerge in the agriculture, its effects were extended to the industry as well. Due to the lack of safe markets, heavy industrial branches declined sharply, whereas the volume of output fell modest in the light industry.
The bankruptcy of the Austrian Credit Anstalt on 12th Mai 1931 adversely affected Hungary’s financial system. In order to overcome the difficulties, banking holiday was ordered by the government, which coupled with the suspension of all payments and the introduction of foreign exchange control.
Foreign trade has changed significantly. In 1937, the share of Hungary’s export in Germany’s trade was 42 percent, which increased to more than 50 percent after the Anschluss. Thus, at the end of the 1930s, the Third Reich became the most important trade partner of Hungary.
Thanks to favourable external conditions accompanied by the rearmament programme of Nazi Germany and state intervention, the performance of the Hungarian economy improved, and by 1937 it surpassed the pre-depression level. The Győr Programme, announced on 12th March 1938 with its military and infrastructural development contributed to the economic boom, which had positive impacts both in the heavy and light industrial branches.
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