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Price: HUF 3000

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HUNGAR 2006

Y

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Publisher in chief: Dr. Pukli Péter Closing date: 8 May 2007

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The population of Hungaryon 1 January 2007 was 10,064,000. The change in population size has been determined for many years by natural decrease and a positive international net migration. Changes in demographic trends were favourable in 2006. The rise in the number of births in the last three years continued, and mortality decreased after its increase in 2005. The number of births has been the highest for the past eight years, while the number of deaths the lowest for the last three decades. There has been a lasting improvement in infant mortality, and this rate fell below 6 per thousand live births in 2006 for the first time. There are fewer and fewer abortions year by year. The number of marriages slightly increased on the previous year, while that of divorces remained essentially unchanged. Following the trend of former years, the proportion of births outside marriage increased, today 36% of babies are not born in traditional families. Natural decrease of the population lessened, further lowered by a higher positive international net migration than in the previous year. The rate of population decrease slowed down last year: the population was 13 thousand fewer, this decrease is some two thirds of the value in the previous year.

The population of the European Union including Bulgaria and Romania having joined it at the beginning of 2007 was nearly 495 million on 1 January this year, 1.8 million more than in the previous year.

Four fifths of the increase resulted from positive international net migration, while one fifth from natural increase. The share of Hungary in the total population of the

Besides a basically decreasing trend, the number of marriagesunderwent fluctuations in the past few years, but did not reach the level at the turn of the millennium in any of the years. There were 44,500 marriages in 2006, exceeding by 270 the preceding year's figure, and by some 700 couples that of 2004. The average age of marrying persons went up. Marriages of teenagers nearly ceased to exist, and a significant fall can be observed as well for females in their early twenties. Ten years ago marriages were most common at this age, while they shifted to the second half of females' twenties nowadays. Males get married mostly at the age of 30–34. The decreasing number of marriages among young people is somewhat compensated for by the growing willingness to get married of the 30–39 year-olds, i.e.

the older age-groups. Postponement of marriage to later in life is partly due to extended time spent in education.

There was no significant change in the number of divorcesin 2006. The courts dissolved 24,500 marriages, about the same number as the year before. Divorces occur in older age, partly as a result of people getting married at a later age, and also because of the increasing tendency for long-standing marriages to end in divorce.

Despite remaining most common among 20–24 year-old married people, the divorce rate in that age-group has been relaxing in recent years, as against a steady increase among married people at the age of 30–44.

It is unchanged that significantly more marriages (74,700) ended owing to widow- hood or divorce than the number of new

Population

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The number of marriages per thousand inhabitants in Hungary was 4.4 in 2006, the same rate as one year before. A lower rate than ours was characteristic of Slovenia, Belgium and Italy only in the European Union (EU-25).

The divorce rate per thousand inhabitants in Hungary was 2.4, somewhat higher than the EU average. Divorce is the least common in Ireland and Italy (0.8 thou- sandths) – not taking into account Malta, where divorce is prohibited by law –, while the highest in Lithuania, the Czech Republic and Estonia (3.0–3.3).

After a temporary rise in 2000, the number of live birthsresumed its annual decline, although at a slower pace. This trend stopped in 2004, and the number of births rose in the pas two years. In 2006, 99,900 children were born, 2.4 per cent more than in the year before, which has been the highest number of births for eight years. Prolongation of the learning time, people's entering in life later, and changes in attitudes towards housing patterns all have had an impact on the number of live births for many years already. There are noticeable disparities concerning the child- bearing attitude of mothers by age. Fertility of teenagers and 20–24 year-olds fell, while child-bearing is the most common among 25–29 and 30–34 year-old females, and the increase is the most dynamic in case of these latter ones. Females in their early thirties bear a child more frequently than those aged 20–24. Fertility of 30–34 year- old females became 35% higher in the last five years, and bearing a child is more and more common over the age of 35 as well.

The demographic reason for the rise in the number of births in the past years is that the „older” age-groups of child-bearing age could successfully counterbalance the

declining child-bearing of younger age- groups. The large number of generations born in the middle of the 1970s, who enter their thirties now, contributed to this, too.

The number of live births per thousand of population in Hungary grew from 9.7 in 2005 to 9.9. Hungary is in the middle of the range among countries of the European Union.

The spread of cohabiting relationships has been accompanied by a rising rate of unmarried females. 36% of children were born outside marriage in 2006, which was the highest rate since the recording of offi- cial vital statistics began. 86% of unmarried females who bore a child were single. The rate of children born outside marriage was the highest among countries of the Euro- pean Union in Estonia, Sweden and France (48–59%), and the lowest in Cyprus and Greece (4–5%). The EU average was 33%.

Fertility in Hungary improved somewhat in 2006 on the year before. At the fertility rate prevailing in 2006, 135 children would be born to every one hundred females during their lives, as against 132 in 2005 and 128 in 2003–2004. Nevertheless, Figure 1: Live birth rate by mothers’

age group

15–19 20–24 25–29 30–34 35–39 40–44 years old

1990 2006

160 140 120 100 80 60 40 20 0

‰

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even this remains considerably short of the 210 children in the average required to ensure simple reproduction. At this fertility level the number of children growing up was some two thirds of the number of their parents' generation.

Although fertility rates in different member countries of the EU have been gradually converging in recent decades, significant differences remain. The average fertility rate per 100 females in the EU was 152. The figure for the states having acceded the EU together with Hungary was even lower at 132.

The number of abortionsin Hungary decreased. The 46,500 abortions carried out in 2006 was 4.5% less than in the previous year, and 21.5% lower than at the turn of the millennium. The frequency of artifi- cial terminations fell in all age-groups of females, thus there were 47 abortions per 100 live births, which is still a substantial value in international terms.

The number of deaths was 131,500, 3.1% fewer than in 2005. This is a significant improvement over not only the year before but is also the lowest figure at the same time in the past 30 years. The decline was largely due to the lack of a flu epidem- ic in spring, which caused a considerable number of extra deaths in 2005. Deaths decreased in the first eight months of the year, and rose in the last four ones only on the corresponding period of the preceding year. Age-specific mortality improved among both sexes. The fall was mainly characteristic of the 35–49 year-old middle-aged males and the population aged 70 years or over. In the European Union, the rate is similarly high to the Hungarian in Estonia, which is topped only by the values for Lithuania and Latvia.

The rate of infant mortalityhas been

the rate improved for both sexes, more strongly did so among boys. In spite of the decline of the gender difference, infant mortality for boys is still 24% above that for girls.

In 2006, more than 6 of every thousand new- born boys, and 5 of every thousand new-born girls died before their first birthday.

In the European Union (EU-25), infant mortality is the highest – ranging between 6.8 and 7.8 per thousand – in Latvia, Slovakia and Lithuania. The figure is the lowest in Sweden, Luxembourg and Finland at 3 per thousand, or even less.

Natural decrease of the popula- tion, as a balance of births and deaths has lasted for a quarter of a century, which is partly offset by positive international net migration. Therefore the actual decrease of the population is lower than the natural one. In 2006 – as a result of a rising number of live births and falling deaths – natu- HUNGARY, 2006

Figure 2: Change in population size

1990 1994 1998 2002 2006

Positive international net migration Actual decrease

Deaths Live births 160

140 120 100 80 60 40 20 0

Thousand persons

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considerably. There were 31,700 more deaths than births. This was some 6590 persons or almost 17% less than in 2005. In 2006, positive international net migration can be estimated to be 18,650 persons.

Thus the population number of Hungary actually decreased by 13 thousand persons, as opposed to 21 thousand in 2005.

Natural increase of the population was 0.8 per thousand in the European Union in 2006. With the exception of Germany, all of the old member states showed population increase, while member states having joined the EU in 2004 witnessed a decrease – except for the Czech Republic and Slovakia, where the balance was zero. The natural increase of the population in Ireland and natural decrease in Latvia are especially high.

After a downturn in the mid-1990s, the number of internal migrationshad been increasing, and following some stagnation, this trend prevailed in the past two years as well. The number of internal migrations

was 457 thousand in 2006, 5.5% more than in the preceding year, and 9% more than two years before. The number of permanent internal migrations has grown by 6.2%, while temporary internal migrations by 4.9% in one year.

One determinant of internal migration flows of the population in Hungary was the outward migration from Budapest, which follows a declining pattern, however. The significant positive internal net migration (11,250 persons) of Pest county is largely due to this. It is characteristic of the capital city that besides natural decrease, the pace of which though has declined in the last few years, outward migration is considerable, too. In 2006, internal net migration was positive in Central Transdanubia and Western Transdanubia as well. In these regions, the main destinations of migration were Gyõr- Moson-Sopron, Komárom-Esztergom and Fejér counties. Among the regions of origin, the population-retaining power of Northern Hungary and Northern Great Plain has weakened further with internal migration losses of 4500 and 5650 persons, respectively, in 2006. The counties which suffered the most severe losses were Borsod-Abaúj- Zemplén, Szabolcs-Szatmár-Bereg and Jász- Nagykun-Szolnok.

International net migration was positive in each region of Hungary in 2006, and especially outstanding in Central Hungary, where in addition to Budapest the rising positive balance of Pest county was also remarkable. The positive international net migration (10,400 persons) was higher in this region alone in 2006 than in the remaining 6 regions of Hungary alto- gether (8400 persons). Besides, Southern Great Plain, Western Transdanubia and Northern Great Plain are all attractive areas in respect of international migration.

Figure 3: Factors affecting population size

1990 1994 1998 2002 2006

Positive international net migration Natural decrease of the population Actual increase or decrease of the population

40 20 0 –20 –40 –60

Thousand persons

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Among regions, the actual population number increased only in the area of Central Hungary last year, by more than 15 thousand. By contrast, the actual decrease of the population was the highest in Northern Hungary and Northern Great Plain, where the population size fell by 8600 and 7300 persons, respectively, in one year. Among counties, the actual number of the population increased in Pest, Gyõr- Moson-Sopron and Komárom-Esztergom counties, while decreased in the rest.

On 1 January 2007, there were 164 thousand foreign nationals in Hungary holding residence permits. This was 5.8% or 9 thousand up on the previous

January. The overwhelming majority came from Europe – principally Romania, the Ukraine, the former Yugoslavian states and Germany. The most significant proportion of immigrants were aged between 20 and 39 (58% for both sexes).

In 2005, 9822 people were granted Hungarian citizenship, as opposed to 5432 in the preceding year. As a consequence of changes to legal rules, the process of granting citizenship has been simplified and has become more rapid,

which played a key role in the significant rise. Nearly 70% of citizenship recipients were Romanians, 10% Serbian and Montenegrins, and 9% Ukrainian.

HUNGARY, 2006

Central Hungary –2.3 3.9 3.6 5.3

Central Transdanubia –3.3 1.1 0.9 –1.3

Western Transdanubia –3.4 0.7 1.9 –0.9

Southern Transdanubia –4.3 –1.9 1.2 –5.0

Northern Hungary –3.7 –3.6 0.5 –6.8

Northern Great Plain –2.1 –3.7 1.0 –4.7

Southern Great Plain –4.6 –0.9 1.6 –3.9

Country total –3.1 – 1.9 –1.3

(per thousand inhabitants) Region Natural decrease

(–)

Internal International Actual increase or decrease (–) net migration

Table 1: Principal vital statistical data by region, 2006

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The number of employedpersons was 3 million 930 thousand in 2006, 29 thousand more than in the year before, while the number of unemployed persons amoun- ted to 317 thousand, exceeding by 13 thousand the value in 2005. The number of employed grew by 74 thousand persons or 1.9% from the turn of the millennium, thus reaching in 2006 the highest level from 1992 onwards. 50.9% of the population aged 15–74 years were classified as employed.

After unemployment reached its lowest ebb in 2001 within the period, it had a continuous upward trend. The abolishment of the mandatory military and civilian service, the lower chance for leaving the labour market because of stricter retirement conditions as well as the labour benefits system changes all played a role in this. The number of the economically active (employed or unemployed) 15–74 year-old population was up by 42 thousand to 4 million 247 thousand.

As a consequence of the slight increase in labour market activity, the size of the eco- nomically inactive populationdeclined.

In 2006, 3 million 475 thousand persons among the 15–74 year-olds belonged to this category, which was 185 thousand fewer compared to the turn of the millennium, and 42 thousand fewer than one year before.

56% of them are pensioners, 23% pursue studies in full-time education, 11% are other dependents (e.g. receive orphan's allowance or nursing fee), 8% receive child-care benefits and 2% receive unemployment benefit based on their former unemployed status.

The decisive proportion (90%) of inactive people declared that they did not wish or

Employment rate of the population aged 15–64, the indicator the most often used for international comparisonincreased in Hungary from 56.0% in 2000 to 57.3%, which is similar to the levels in Slovakia and Italy, and exceeds the rates for Poland and Malta. The average employment rate of the 25 member states of the European Union is 65%, which rose by 2 percentage points during seven years. In some old member states (Austria, Denmark, the Netherlands, United Kingdom, Sweden) the employment rate is as high as 70–78%. The high level of employment is largely due to the fact that atypi- cal forms of employment are more common in these countries. Though the proportion of persons working in part-time employment is highest in the Netherlands (46%), the rate is also high in the United Kingdom, Sweden, Belgium, Germany, Austria and Denmark.

In 2006, the indicator for Hungary remained at the level of the last few years (4%), which is similar to the ones in the Central and Eastern European countries.

The distribution of employmentby sex has not changed in recent years: out of one hundred employed persons 54 are males and 46 are females. The trends in their age composition in former years continued to prevail, i.e. a decline in the employment of young people (15–24 year-olds), and a rise in that of older (50–64 year-old) age- groups. From the turn of the millennium the employment rate of the 15–19 year-olds fell from 8% to 3%, while that of young persons aged 20–24 from 53% to 39%. This is due to the expansion of education and the scarcity of jobs. Among older age-groups in

Employment and unemployment

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people the employment rate went up by 3, 16 and 6 percentage points respectively from year 2000, in which the change in the retirement age and the stricter retirement rules played a role.

In 2006, concerning the number of people employed in agriculture the downward course of recent years continued. Therefore the share of those employed in this sector fell below 5%. The workforce shrank in manufacturing, trade and repair, and other community, social and personal services. In the remaining economic branches of the national economy (financial intermediation, public administration, compulsory social security, education) workforce stagnated or increased to varying extents. The number of employed persons rose the most in transport, storage, post and telecommunications.

The overwhelming majority (87%) of employed persons work as employees. The proportion of people working at sole pro- prietorships, partnerships and companies accounted for 12% in 2006, 1 percentage point less than in the year before. The rate of cooperative members, which can be con- sidered marginal, did not change, while that of assisting family members grew from 0.4% to 0.5%, although their number is negligible, too.

The downward trend of unemploy- ment between 2000 and 2002 was followed by small rises in 2003–2004, and a faster rise afterwards. The number of unemployed persons was up by 53 thousand (from 264 thousand to 317 thousand) since the turn of the millennium, while the rate changed from 6.4% to 7.5%, and approached the 1998 level. In international terms Hungary is in the middle of the range among EU countries, and the level of unemployment in the 15–74 year-old population – based on data harmonised by Eurostat –

is similar to that of Portugal, Finland, Malta and the Czech Republic, while lower than the EU-25 average. The direction of change between 2000 and 2004 was identical in the Union and Hungary. However, in the past two years a decreasing tendency of unemployment prevailed in the European Union – contrary to the case of Hungary.

While in former years the female unemployment rate had remained below the rate for males, it was equal to that in 2004, and slightly exceeded that in 2005. Female unemployment increased form 7.5 to 7.8%, and male unemployment form 7.0 to 7.2%

over a year.

Although youth (15–24 year-olds) unemployment increased to a high extent in 2004–2005 (by 3.9 percentage points), it Figure 4: Umployment rate of the

15–74 year-old population, 2006

0 2 4 6 8 10 12 14 16

% Netherlands

Denmark Ireland United Kingdom Lithuania

Slovenia Italy Czech Republic Hungary

Portugal Germany

Greece France Slovakia Poland Romania Bulgaria

EU-25 average

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diminished from 19.4% in 2005 to 19.1% in 2006. The highest level of education of one in three young unemployed is primary school, which is detrimental to their chances of finding a job, and the proportion of long-term unemployed, i.e. those not having a job for at least one year is much higher among them. The proportion of unemployed young graduates in the age- group went up on the year before by 1.6 percentage points to 8.4%.

The rate of long-term unemployed, i.e.

the people without work for a year or longer was 47% in 2006 compared to 46% one year before.

Unemployment touched 8% of households in 2006, or one in 13 families.

The labour market status of regionsin 2006 was essentially unchanged, the exist- ing disparities did not decrease. The employment rate of 15–74 year-olds remained the highest (56%), and unemployment rate the lowest (5.1%) in Central Hungary.

Contrarily, the labour market situation was the worst in Northern Hungary, where the level of employment was the lowest (44.3%) and the unemployment rate was the highest (11.0%) in national terms, though the employment rate rose by 0.7 percentage point in one year. The highest increase over 2005 was experienced in Northern Great Plain in case of both employment and unemployment rates, by

1.1 and 1.8 percentage points, respectively.

During the last year the rate of employed persons was up in all the regions except for Central Hungary, while the rise of the unemployment rate was characteristic of Southern Transdanubia, Northern Hungary and Northern Great Plain.

HUNGARY, 2006

Figure 5: Employment and unem- ployment rates by region, 2006

Central Hungary Western Transdanubia Central Transdanubia Southern Great Plain Southern Transdanubia Northern Great Plain Northern Hungary

Employment rate Unemployment rate

Unemployment rate, %

0 4 8 12

0 20 40 60

Employment rate, %

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The real incomeof the population continued to increase in 2006, though at a slower pace than in the previous year. It was the slowdown of real wage rise that played a key role in the slowing growth rate. In addition, the accelerating rise of consumer prices in the last months of the year reduced the real value of the other incomes in cash, and its increase, too.

Among the main items of income the real wages of employees per earner were up by 3.5%, and the real value of pensions and pension-like benefits per head by 4.5%

over the year before. Central government funds spent on family assistance and social benefits – the proportion of which from the total income is modest – increased by 31%

at current prices (by 25–26% in real value).

The volume of social benefits in kind practically stayed at the level of the previous year.

Earnings, income position

Government measures after the turn of the millennium – substantial minimum salary rises in 2001 and 2002, pay rises for profes- sional soldiers, earnings rises for civil ser- vants in 2001 and 2003, and the salary rise for public employees in 2002 – had a major impact on earnings. No earnings-raising measures similar to former years were taken in 2004, and the end-year postponement of „13th month” salary payment to the public sector to January 2005 worked in the opposite direction – lowering the dynamics. This administrative measure was one of the reasons for a significant rise

nominal earnings slowed down, of which that of net earnings more strongly than gross earnings. The background of this was the rise of health and employee's contributions in September, burdening employees.

The average gross nominal ear- nings per head of people in full-time employment stood at HUF 171,200 in 2006. Non-manual workers earned HUF 239,400, and manual workers received HUF 111,800. Gross wages grew in nominal terms by 8.1% on 2005, of which 7.4% for non-manual and 8.9% for manual workers.

Although between 2000 and 2003, and in 2005, earnings rose faster in the public than in the private sector, this trend did not prevail in 2004 and 2006. Private sector workers received average earnings rises of 9.3% last year, against gross wage rises of 6.4% for public sector workers. The average earnings of manual workers in 2005–2006 was slightly (1–2%) higher in the public sector than for the employees of corpora- tions. Average earnings of non-manual workers have remained lower in public sector institutions than in the private sector.

Their lag behind in terms of earnings was increasing: it was 8% in 2003, 13% in 2005 and 16% last year.

Earnings difference between the sectors did not change substantially. As in the past few years, the gross average earnings of financial sector workers was the most outstanding in 2006, 2.4 times the national average (against 2.2 times in 2005). This was followed by the electricity, the chemical industry as well as the public administration, compulsory social security sectors,

Income and consumption

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above the national average. The lowest average earnings in manufacturing industry were in textiles, textile products, leather products and footwear, at 55% of the national average.

The situation in the branches of hotels and restaurants, manufacturing not elsewhere classified, agriculture and construction was somewhat more favourable, where persons employed earned 60–70% of the national average. Last year the gap between the highest and the lowest average earnings somewhat widened in the economic branches observed. The average gross earnings of textile industry workers were 23% of those employed in financial intermediation.

Income from workincludes in addition to the monthly earning other benefits in cash and kind¹of people in employment. In 2006, the average monthly labour income in the national economy was HUF 180,300, HUF 9100 more than gross average earnings. The rate of „other labour income” was thus 5.0%, nearly the same as in 2005.

Other labour income accounts for the highest proportion in public administration and in the transport, storage, post and telecommunications as well as electricity sectors.

Average net monthly earningsstood at HUF 110,900 in 2006, 7.5% more than in the year before in nominal terms. Net earnings accounted for 65% of gross earnings, 0.3 percentage point less than in 2005. The earnings for manual workers was HUF 81,800 and for non-manual workers HUF 144,200. The net earnings difference between these two categories remained stable, as in previous years. As a result of the progressive pattern of personal income tax, sectoral differences of net earnings are

smaller than of gross earnings. Net earnings level of the textile industry reached 32% of the figure for the financial sector.

Though there was a smaller nominal rise in wages than in former years, it was more balanced in the regions, thus the level differences between regions remained substantially unchanged. The increase of the net value of earnings exceeded the national average only in Central Hungary, where the amount of wages received remained the highest, at HUF 128,200. Workers in Southern Great Plain earned the least (HUF 94,500), which was 85% of the national average.

The net wages that could be earned in Northern Great Plain were hardly higher than this. The advantage of the highest- earning region over the lowest slightly grew to reach 36%.

1 Meals and accommodation allowance, reimbursement of travel to work expenses, long service bonus, bonus in kind, company car-related expenses etc.

Figure 6: Monthly average nominal earnings of different employment

categories

2000 2001 2002 2003 2004 2005 2006 Manual workers

Non-manual workers 270

240 210 180 150 120 90 60 30 0

Thousand HUF

Gross

Gross Net

Net

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On the whole, the real value of earn- ings was up by 44% between 2000 and 2006, of which by 3.5% in 2006. The rise was far from being balanced, its pace slowed down after 2002 and 2003, but exceeded the GDP growth rate each year except for 2004 and 2006. A major factor in last year's slowdown was the rise of health and employee's contributions in September, burdening employees, and the accelerating rise of consumer prices.

During the year, real earnings grew to the highest extent, by 5.7%, in Q I, while decreased in Q IV by 0.4% on the corresponding period of the previous year. Real earnings thus increased by 2.0% in case of public sector institutions and by 4.4% in the private sector.

In international terms, the level of earnings is realistic to be analysed in pur- chasing power parity eliminating price level differences. The most recent avail-

Union referred to the industrial and the services sectors. Based on this, the average gross monthly earnings in the European Union were exceeded by the earnings of 9 countries, two countries of which, Luxembourg and the United Kingdom, to a substantial extent (by 31 and 25%, respectively). The earnings indicators of developed countries like Sweden, Italy and Finland were a few per cent below the average. The wage level of Cyprus was the most outstanding among new member states, with 67% of the average, which exceeds that of Portugal among the old member states, and hardly lags behind the Greek one. In addition, Slovenian wages were also higher than the Portuguese level, and earnings of the remaining new member states ranged from 27 to 48% of the EU average.

Earnings in Hungary in the sectors exam- ined reached 42% of the average for EU member states.

EU member states spent somewhat more than 27% of gross domestic product on social solidarity in 2004. This rate exceeded even 30% in Denmark, France and Sweden. Contrarily, welfare expenditure equalled hardly 13% of GDP in the Baltic states, which was 6–7 percentage points below the average expenditure of the 10 counties having joined the EU in 2004. Among new member states social expenditure was equal to or higher than one fifth of GDP in Slovenia (24%), Hungary (21%) and Poland (20%).

The biggest component of expenditure – in all member states – is pension, ensur- ing the living of old people. Member states spent 12% of gross domestic product on pensions in 2004. The most, nearly 15% of GDP, was spent in Italy, while the least, HUNGARY, 2006

Figure 7: Average net monthly earnings in regions, 2006

Southern Great Plain Northern Great Plain Southern Transdanubia Northern Hungary Western Transdanubia Central Transdanubia Central Hungary

0 30 60 90 120 150 Thousand HUF Average

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30% of the population, some 3 million people received pensions or pension-like benefits in Hungary in 2006. The fall in the number of recipients of pensions or pension-like benefits since 1999 continued in 2006, too. 54% of pensioners received old- age pensions and a further significant proportion – somewhat more than a quarter – of them were awarded disability pensions.

7–8% received payments due to handicap or reduced working ability.

10.7% of GDP was spent on the above payments in Hungary in 2006, which means that somewhat more than HUF 2510 billion was paid on pensions and pension- like benefits from social security and non- social security funds. The average monthly payment per pensioner exceeded HUF 69 thousand, an increase of HUF 6000 or 9%

at current prices over the year before. The

consumer price index calculated for pensioners – resulting from the special composition of consumption – was higher than the average, at 105%. Taking into consider- ation this, the payment per pensioner was 4.5% higher in real terms than in the previous year. The difference between earnings and pensions continued to shrink during 1 year; the proportion of pension provision to net earnings grew above 62%.

The state spent nearly 2% of GDP on family support and child care in 2006.

The largest part of this amount was made up by family allowance, while child care allowance and child care fee represent further substantial proportions. In 2006, 1 million 269 thousand families received family allowance for 2 million 67 thousand children, an average of HUF 21,600 per month, which was HUF 9000 more at current prices than in the previous year, and 65% higher than then in real terms. The high increase is partly due to the fact that former tax benefits for 1 or 2 children were integrated into this form of support. Child care allowance was claimed by 167 thousand families, the average monthly amount per head equalling somewhat more than HUF 27 thousand. 91,700 persons received child care fee, the monthly amount of which was almost HUF 63 thousand.

Financial assets of households*

The slowing pace of rise in gross household financial assetsat the beginning of the 2000s was followed by higher annual increases of 14–15% in 2004–2005. In 2006 the rate of growth somewhat lessened, it showed around 12%. At the end of Figure 8: Expenditure on pensions

as a proportion of GDP, 2004

0 5 10 15%

EU-15 Poland Slovenia Malta Hungary Cyprus Czech Republic Slovakia Lithuania

Latvia Estonia

* Source of data: National Bank of Hungary.

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December the amount of savings was more than 21.3 trillion forints or 90% of GDP.

In older member states of the European Union the rate of household savings to GDP is in excess of Hungary's. It was highest in the Netherlands and the United Kingdom (almost 3 times higher than GDP), followed by Belgium with a factor of 2.6. Among these countries the lowest rate was in Finland, but even there, savings were 1.2 times higher than GDP. In countries having joined the EU in 2004 an even lower rate was observed than this latter one. Among them savings were higher than GDP in Cyprus and Estonia and nearly equal to that in Slovenia.

When looking at a longer period of time in the structure of savings in Hungary, two essential changes can be observed: on the one hand, the amount and proportion of insurance technical reserves was dynami- cally rising, on the other hand, the rate of cash and bank deposits as well as securities other than shares – in spite of their growing amount – was diminishing. As for the remaining main forms of saving, rates did not considerably change disregarding smaller fluctuations in different years. In the course of 2006 savings fluctuated substantially quarter by quarter, in which a key role was played by fluctuations in forint and stock exchange prices and the introduction of an interest tax in September. This latter caused a change in the structure of financial savings, too, significant amounts of assets held on current accounts and short- term forint deposits were reallocated to other financial assets, primarily long-term forint deposits, investment funds, government securities, mortgage bonds, life insurance schemes, and also had an impact on forint and foreign exchange rates.

In 2006, too, the highest proportion,

ed by cash and bank deposits. They amounted to HUF 7.8 trillion at the end of December, some three quarters – a declining proportion – of which was bank deposits, and the rest was cash. Within this latter, in addition to the growth of forint cash and as opposed to the past few years the amount of foreign currency savings significantly increased to almost 1.9 times its former stock, although their proportion of total savings was only 0.5%. Within this major form of savings the growth rate of deposits – representing the decisive proportion – overall slowed down somewhat in 2006 on the year before. The amount of foreign exchange deposits expressed in forints, following a decrease from 2001 in nominal terms, went up both in 2005 and 2006. The rise in forint deposits took place as interest rates on deposits diminished in 2004–2005, but increased in 2006. In December 2006, the average annualised interest rate on at-sight and current account deposits was 2.7%, as against 7.7%

for term deposits, of which those maturing over a year stood at a lower level.

The second large group, a third of household savings (HUF 7.3 trillion at the end of 2006) was represented by securities (shares). There was a significant realloca- tion within this form of saving in 2005–2006, the weight of shares and stakes declined, while that of investment funds increased. The proportion of these latter went up to 24% in 2006, 10 percentage points more than in 2004. A falling rate of savings, 6.2% in 2006, was represented by securities other than shares. 83% of this stock of HUF 1.3 trillion was made up by securities of the central government.

The stock of 3.9 trillion forints of insurance premium reserves and pension fund HUNGARY, 2006

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than one year before, and more than 4.1 times the stock in December 2000. Their proportion of total savings went above 18%.

The pre-condition of the extension of this form of saving was the establishment and extension of voluntary – later compulsory – pension fund systems founded in the 1990s, and the emergence of life insurance schemes linked to investments, which – in addition to people's strive for higher security and the more flexible adaptation of their saving habits to new circumstances – resulted in a dynamic development. At the end of December 2006, six tenths of insurance technical reserves were made up by pension insurance reserves, a third by life insurance, while the rest by other insurance reserves.

In the last few years, household liabil- itiesgrew at a very high pace, 5.9 times over 2000. The rate of increase was some 40% in 2001, around 50% annually in 2002–2003, which was gradually slowing down in the subsequent years, and was 19%

in 2006. The stock was extended by HUF 1–1.2 trillion per annum, exceeding HUF 6.7 trillion at the end of 2006. Credit and loans accounted for a rising rate of liabilities, 90% in 2006, while other liabilities for the rest. These latter represented one third of the stock yet in 2000. (This group includes personal income tax, employee's contribution and employer's contribution, which items are categorized among other assets, too.)

Among older member states of the European Union household liabilities were the highest – more than the amount of GDP – in Denmark, the Netherlands and the United Kingdom, while the lowest in Italy, where they made up hardly more than one third of the gross domestic product. In countries having joined the EU in 2004

they were lower than that except for Estonia and Hungary. In Hungary household liabilities were equal to some 29% of GDP at the end of 2006, while remained below 9% in 2000.

In addition to the expansion of loans – which increased by a factor of 7.9 in six years to HUF 6.1 trillion – among total liabilities, the past few years saw the significant redistribution of its composition as well, which affected the scope of credit providers, the types of credit and the currency (forint or foreign exchange) serving as the basis of the credit.

At the beginning of the decade consumer and other credit provided by credit institutions accounted for over half, real estate loans for a quarter of all loans. Credit provided by other financial intermediation institutions (financial and investment enterprises, leasing enterprises, investment funds and their managers) represented a

Figure 9: Household credits (at current prices)

2000 2002 2004 2006

Credit provided by other sectors Credit provided by other financial

intermediation institutions Consumer and other credit Real estate loans

70 60 50 40 30 20 10 0

Trillion forints

(23)

proportion of over 10%, and credit provided by other sectors had the same rate. By the end of 2006 the proportion of real estate loans – mainly affected by state-sup- ported and low-interest credit – grew to 45%, consumer credit declined to one third, that of financial intermediation institutions approached 20%, while that of other sectors remained below 2% of all loans. During the same period the proportion of forint- based credit lessened, while that of the foreign exchange-based one rose form 7 to over 49%. The stock of these latter nearly doubled yearly from 2001 to 2005, and although this rate slowed down – essentially owing to the high base – to 46% in 2006, it resulted in an additional increase of some HUF 1 trillion in amount. At the same time forint-based loans practically stagnated in 2005–2006, the annual growth remaining below 3%. The proportion of Swiss franc- based credit among foreign exchange- based credit was up by 1.9 times in one year, thus its proportion increased over 54% at the end of 2006.

The growth of foreign exchange-based credit was largely due to considerably more favourable interest and credit cost terms of euro- and especially Swiss franc-based credit than the domestic ones. The slow decrease of forint-based credit interest rates in the past few years was followed by a rise in 2006. At the end of December the average annualised interest rate was 10.3%

for housing loans, 19% for consumer credit and 23.6% for current account credit. The average credit cost indicator, though fluctuating during the year, lessened slowly on the whole and was equal to 24.3% for consumer credit in December 2006. The average annualised interest rate of Swiss franc- based credit was 3.4% for variable interest

housing loans, 4.8% for freely usable mortgage loans, and 13% for personal loans, while the average credit cost indicator was 5.8, 7.1 and 18.4%, respectively.

It was essentially the change in gross savings that had a major impact on the net financial assets of households at the beginning of the 1990s. As a consequence of the dynamic growth of liabilities since the last years of the decade, the effect of both factors prevailed. In 2003 the annual increase of savings exceeded only to a modest extent the highest rise of liabilities in absolute terms in one year measured until that time. In 2004–2005 the upward trend in the amount of savings was accompanied by an essentially unchanged growth of liabilities, due to which net financial assets expanded significantly, by 1 and 1.3 trillion forints, respectively. In 2006 assets were up by some 12%, while liabilities by more than 19% on the year before, thus net financial assets grew by nearly 9%, to HUF 14.6 trillion at the end of December. This amount represented 62% of GDP.

HUNGARY, 2006

Figure 10: Annual change of nominal household assets

and liabilities

1998 2000 2002 2004 2006

Assets Liabilities 3 000

2 500 2 000 1 500 1 000 500 0 Billion forints

(24)

The ratio of deposits to loans decreased at a rapid rate from 8.5 at the end of year 2000 to 3.6 at the end of 2004, and at a lower rate afterwards, to 3.2 in December 2006. Regarding foreign exchan- ges, households used to be net foreign exchange creditors, their assets were 16 times higher than their liabilities at the end of 2000. In the subsequent years a considerable change followed, owing to which households have become net foreign exchange debtors since the second quarter of 2004, and this process has continued ever since.

Their foreign exchange assets covered 57%

of their foreign exchange liabilities at the end of 2004, and 36% in 2005. In 2006 the rise of foreign exchange liabilities was accompanied by the dynamic growth of assets, therefore the ratio diminished to a lesser extent than before, by 2 percentage points to 34%.

Consumption

The consumption of households – according to preliminary data of national economy accounting – was HUF 15 trillion 780 billion in 2006, 67% of gross domestic product. This rate fell by 1 percentage point over the year before, but was even so 4 percentage points higher than in 2000. Last year there was a consumption of HUF 1 million 673 thousand per inhabitant in the average. The majority, 78.5% of final consumption was covered by consumption expenditure of households, while the rest by social benefits in kind. The proportion of these latter has become some 2 percentage points higher since the turn of the millennium.

Consumption during the last decade rose to varying extents every year. The period following the turn of the millennium was characteristic of big differences in the rate of annual increase: there was an example of

a nearly 10% rise (in 2002), but the 1.2%

measured last year was the most modest extension of consumption in the past decade. Even thus the level in 2006 was 35–36% higher than in 2000, while GDP increased by 28%. The modest growth in 2006 was the result of the 1.5% increase of the consumption expenditure of households, and the 0.2% rise of the volume of social benefits in kind. Within this latter, benefits from the government somewhat decreased, while those from non-profit institutions were somewhat up.

Although the structure of consump- tion hardly changes from one year to another, redistribution is perceivable during a longer period. In the last few years – similarly to economically developed countries – housing, water, electricity, gas and other fuel became one of the biggest parts, nearly one fifth of domestic consumption, which, together with household equipment and household maintenance make up already a quarter of consumption. Thus food, which formerly represented the largest item of consumption, was ranked second with its proportion of 17–18%.

The national average food consump- tion in Hungary has already reached and even exceeded for a long time the nutrition- physiologically recommended level in terms of volume and based on energy con- tent. However, its structure cannot be regarded as optimal from the point of view of health promotion in many aspects, although changes regarded by specialists as essential can be seen over a longer period of time. It is worth mentioning among them the fall of the proportion of cereals in energy consumption from 31.3% in 1990 to 26%

in 2004, and the rate of sugar and honey during the same period lessened from 12.5% to 11%. The high, 26% share of fats

(25)

and oils has not changed but their composition shifted towards vegetal products – edi- ble oil and margarine. The proportion of meat and fish, and potatoes in energy intake grew by some 2–2 percentage points, respectively, and to an even higher extent – from 5.1 to 9.0% – that of vegeta- bles, fruit and other vegetable food.

The share of beverages and tobacco has hardly changed over the years, fluctuating between 8 and 9% of total consumption, and that of clothing has become more and more modest, hardly reaching 4%.

Observations of expenditure on health and personal care also reflect a low and hardly rising proportion at 3.5%. Nevertheless, the proportion of both transport and communication has considerably been up, and these two together are nearly equal to one fifth of consumption expenditure. The rate of expenditure on culture, entertainment, journeys and similar items has been last- ingly around 14%.

According to household statistics there are smaller differences on the whole in the consumption of population decilesestab- lished on the basis of the size of income than in their incomes. In 2005 net income of the population decile with the highest income was 5.9 times that of people belonging to the decile with the lowest income. In the same year the rate of total personal consumption expenditure was not more than 4.5. It is due among other things to the fact that people with high incomes spend a part of their receipts not on consumption but accumula- tion (e.g. savings), whilst the consumption of people with low incomes sometimes exceeds their income (paid e.g. by loans).

Certainly, the level of income considerably influences the structure of consump-

tion. This can be seen both in the structure of consumption of people with different incomes and in the rates of their different items of expenditure compared to one another.

Comparing to one another the per capita expenditure by major groups of consumption between the consumption expenditure of the two extreme income deciles, the smallest, 2.5-fold difference is shown in case of food, while the highest, 8.2–8.3-fold difference in case of transport, communication as well as culture, recreation and entertainment. Ten years before there were significantly lower differences between the levels of consumption: in 1995 the consumption expenditure of the tenth population decile – having the highest income – was 3.3 times that of the first decile as against 4.5 times today. In a decade the difference between the level of consumption of the two groups perceivably increased both on the whole and in each major group of consumption – with one exception.

The growth of consumption also implies expanding stocks of both traditional and newer and newer consumer durable goods. Almost half of house- holds have an own passenger car, there is at least one colour television set in 97% of households, while refrigerator, washing machine, microwave oven and mobile phone can be found in 70–75% of them.

There is a video-recorder in more than half, HIFI equipment in one third, CD- player and DVD in some one quarter of households. Dishwashers, drying machines, cleaning machines and air condi- tioners, though low in number for the time being, have already appeared, mainly in wealthier households.

HUNGARY, 2006

(26)

Consumer price changes

The growth rate of consumer prices steadi- ly slowed in the first years of the new millennium (starting from 1996, though). This trend was broken in 2004, inflation accelerated to 6.8%, largely due to the price rise resulting from VAT and excise duty changes. In 2005 the annual average consumer price change was 3.6%, substantially less over the previous year. In the aver- age of 2006 consumer prices exceeded by 3.9% the level in the previous year, to a somewhat (by 0.3 percentage point) higher extent than in 2005.

The rate of price rise considerably changed in the course oflast year. In the first four months of the year prices rose by 2.5% in the average on the same period of the previous year, but the pace of inflation gradually accelerated from May primarily because food and fuels became more expensive, a phenomenon strengthened

further by administrative price measures (e.g. a significant rise of the piped gas price) in effect from September. In October the consumer price rise exceeded 6% for the first time in two years' time, and this rate continued in the last two months of the year. The average price level in December was 6.5% higher than one year before.

Price changes in 2006 were significantly influenced by changes in the tax sys- tem. At the beginning of the year the for- mer 25% value added tax rate was cut to 20%, and on 1 September the products and services which formerly fell under the value added tax rate of 15% were also reallocated under the 20% tax rate, and vehicle regis- tration tax and excise duty grew, too. The reduction of the value added tax rate at the beginning of the year enhanced mainly the drop of consumer durable goods' prices, while the value added tax change at the beginning of September can especially be perceived in case of food price rises, since Figure 11: Consumption difference between the

population deciles with lowest and highest income (on the basis of consumption per head)

0 2 4 6 8 10 -fold

Personal expenditure, total

Food Housing Clothing Health, personal care Transport, communication Culture, recreation, entertainment

1995 2005

(27)

the decisive majority of this group of products fell under the tax rate of 15% earlier on.

The cut in the value added tax rate prevailing during 12 months had a bigger impact on the annual price level, the constant tax price index increased by an annual average of 5.1% (similarly to the consumer price index, the increase was 6.4% in Q4). The consumer price index for pensioners was 105.0% in 2006 (108.4% in Q4). In case of active households consumer prices were up by 3.4%. Among all households the price index for those with low incomes rose by 4.8%, to a higher extent than the average, while for those with high incomes by 3.3%, lower than that.

The more rapid rise of consumer prices than in the previous year was principally the consequence of higher rate price rises of food, alcoholic beverages, tobacco and household energy than in the previous year, in the other main groups of consumption change was in the opposite direction. Food pricesincreased to the highest extent, by 7.7%. The nearly 35% price rise of seasonal price food having a growing weight in consumption played a key role in this. Prices in this major group of expenditure rose at an accelerating rate from January, the lowest rate registered in the first month of the year was 3.5%, while the highest was 12.6% in November, hardly more than the 12.3% in December. In the whole of the year nearly 50% of consumer price rises was caused by food price rises. Household energy prices – following a lower than 1% rise in the first eight months – were up by 17–19%

in the last four months of the year as a result of administrative price changes. The annual rate of price rise was 6.4% in the average. During the year the prices of alcoholic beverages and tobacco and of services rose above the average too, by 4.3 and 4.1%, respectively. The price rise in the main group of other items and fuels was lower than the average due to decreasing fuel prices in the second half of the year, while prices of articles of clothing and consumer durable goods were lower than a year before (by 0.7 and 4.0%, respectively).

The harmonised consumer price index of the 25 member states of the European Unionwas 102.2% – as in the previous year. Among member states the highest, 6.6% rise was measured in Latvia, while the lowest (1.3%) in Poland and Finland.

HUNGARY, 2006

Figure 12: Consumer price rise per month, 2006

(on the corresponding period the previous year)

0 1 2 3 4 5 6 7 %

January February March April May June July August September October November December

Annual average

(28)

Food 23.09 2.5 7.7 +5.2

Alcoholic beverages, tobacco 8.75 3.3 4.3 +1.0

Articles of clothing 5.31 0.2 –0.7 –0.9

Consumer durable goods 9.24 –2.3 –4.0 –1.7

Household energy 8.46 6.2 6.4 +0.2

Other items, fuels 17.28 4.5 2.7 –1.8

Services 27.88 5.5 4.1 –1.4

Total 100.00 3.6 3.9 +0.3

Main group of consumption Changes on the previous year, % Rate difference (percentage

point)

denomination proportion, % 2005 2006

Table 2: Consumer price changes

Figure 13: Harmonised consumer price index in the European Union, 2006 (previous year = 100)

100 101 102 103 104 105 106 107

% Latvia

Estonia Slovakia Hungary Lithuania Spain Greece Portugal Luxembourg Malta Slovenia Belgium United Kingdom Cyprus Italy Czech Republic France Germany Denmark Austria Netherlands Sweden Poland Finland

EU-25 average

(29)

Housing

The number of dwellings was 4,238 thousand at the beginning of 2007. Since fewer dwellings were built in 2006 and dwelling cessation somewhat diminished, expansion of the dwelling stockwas lower than in former years, less than 0.7%. Population per 100 rooms has been below 100 since the turn of the millennium, standing at 92 at the beginning of 2007. A rise in the dwelling stock and the decrease of the population contributed to the fall of occupation density to such an extent.

In the past few years indicators on the equipment of the dwelling stock have con- tinuously been on the rise, disparities between settlements – concerning especially the level of connection to sewerage network – still prevail. The rate of two thirds of dwellings connected to public sewerage network comprises the averages of 94% for Budapest and hardly one third for villages.

90% of dwellings are supplied with piped water, water closet, bathroom or washing premise, and 70% of households receive piped gas.

The majority (53%) of dwellings have had one or two rooms. Since the proportion

of small dwellings grew in dwelling constructions in the last few years, the decline in the number of one-room dwellings stopped in 2005, and a small upturn can be observed ever since. There were 522 thousand dwellings with one room in Hungary at the beginning of 2007, while the number of dwellings with three or more rooms was almost equivalent to two millions.

In 2006 nearly 34 thousand dwellings received permit to be put to use, and construction permits were issued for the construction of almost 45 thousand. The boom of dwelling construction having started six years ago and lasting until the record year of 2004 (20% growth) resulted in an at least 10% rise of the number of dwellings built each year. After a slight decrease (6%) in constructions in 2005, there was a significant decline in 2006: the number of dwellings built fell by 18%, while that of issued permits by 13%. The construction of dwellings built for sale lessened to a higher- than-average extent.

There was an upturn in dwelling construction in towns after 2001 and especially in Budapest from 2004. This latter was highest in 2005 when a decline began in the

Living conditions

One 517 519 521 522 1.0

Two 1,682 1,703 1,712 1,719 2.2

Three or more 1,866 1,951 1,976 1,998 7.1

Number of rooms

2001 2005 2006 2007 Change between

2001 and 2007, thousands %

Table 3: Dwelling stock by number of rooms (at the beginning of the year)

(30)

rest of towns. In 2006 dwelling construction in Budapest decreased, too, by one third.

The downturn in constructions affected all the regions, Central Transdanubia the least – where only 1% less dwellings were

built – and Central Hungary the most, which suffered a 22% decline. The cause of this latter drop was clearly the dwindling building activity in Budapest. However, the most dwellings per ten thousand inhabitants were still built in Central Hungary (52), over 1.5 times the national average and 44% of all the new homes built. (28% of the population live in this region, and 30%

of the dwelling stock can be found here.) In Northern Hungary – similarly to previous years – only half of the average was built.

The upward trend of constructions by enterprises from 2000 was broken in 2006:

while they built 15% of new dwellings in 2000, they represented already 45% in five years' time as a result of their continuous expansion. Due to the decrease of their per- formance by 20%, construction of dwellings built for sale declined by 21%, and, regarding the form of construction, constructions in multi-storey buildings containing several dwellings or in buildings in residents' parks fell by 26%, both to a higher-than-average extent.

Figure 14: Dwellings built per ten thousand inhabitants

by settlement type

2000 2002 2004 2006

Budapest Villages Other towns National average 80

70 60 50 40 30 20 10 0

2000 15 .. 60 98

2001 22 22 65 95

2002 30 33 71 94

2003 31 38 72 95

2004 37 41 73 93

2005 45 46 77 87

2006 43 41 75 89

Year

Proportion of

Average floor area, m² dwellings built by

enterprises

dwellings built in multi-storey buildings containing several dwellings or in residents' parks

urban dwellings

%

Table 4: Main indicators of dwelling construction

(31)

Most dwellings in 2006 were built by natural persons (55%), for own use (53%), and in detached houses (51%). Construc- tions by local governments (300 dwellings) did not reach even the half of their per- formance in the previous year.

The average floor area of new dwellings was highest in 1999, equivalent to 100 m². It has increased since, although fluctuating, by 11 m², and is 89 m²at present. In 2006 the number of dwellings having less than 60 m²diminished to the highest extent (by 26%), while those having more than 100 m² to the least extent (by 11%).

In the past 6 years 31,461 dwellings ceased, largely due to obsolescence or because of the construction of new dwellings. They numbered 4900 in 2006.

Housing loanstotalled HUF 2674 billion (11% of GDP) on 31 December 2006, 34% of which was made up by foreign exchange-based loans. The amount of housing loans has been increasing since 2002. The biggest rise was between 2002 and 2003, when it doubled in one year's time. Total loans were up by 19%, while the foreign exchange-based rose two-fold over 2005.

During the year 149 thousand new housing loans were granted, of a total amount HUF 747 billion, 24% of which were state- subsidised. The number of loans granted rose by 23%, and their amount by 39% on 2005, while the amount of the average loans went up by HUF 600 thousand, to HUF 5 million.

HUNGARY, 2006

Figure 15: Housing loans and subsidies per semester (at current prices)

QI–QII QI–QII QI–QII QI–QII QI–QII QI–QII

2001 2002 2003 2004 2005 2006

500 450 400 350 300 250 200 150 100 50 0 Billion HUF

Purchase of old Dwelling Purchase of new Modernisation, Other

dwelling construction dwelling extension

(32)

The environment and its protection

In 2005 there were 839 thousand hectares of protected areas of national signifi- cance in Hungary, 11 thousand hectares more than a year before. Highly protected areas were extended by 1.8 thousand hectares, and their share was almost 16%.

Nearly 60% of our protected areas are national parks, the most variable category of nature conservation. Although the number of our national parks (10) is unchanged, their area was extended by 940 hectares.

Our landscape protection regions with specific natural or landscape endowments account for 38% of protected areas.

The Natura 2000 ecological network of the European Union is a chain of more or less coherent natural areas and habitats, which preserve the diversity of the original European biosphere. Almost 21% of Hungary's area is Natura 2000 area, in which, in addition to our protected areas so far, further 1.2 million hectares were granted community protection. A very high percentage of these are agricultural areas, grasslands, lakes and rivers, where agricultural activity has been performed for centuries, and where the role of farmers, maintainers and traditional ways of farming are especially outstanding.

Here, instead of a reserve-like protection, the conservation based on the harmonisation of social, cultural, economic and nature conservation interests can be dominant.

The European Union aims at stopping the decrease of biological diversity until 2010. According to experts the number of bird populations living on arable land is a good indicator of the extent of biodiversity.

Europe was richer in populations at the beginning of the 1990s than in 2000, and although diversity increased in 2003, it

exceeded the year 2000 level only in three countries, including Hungary.

All of the 4110 caves opened up in Hungary are protected, 145 of which highly protected. The Baradla-Domica cave system of the Aggtelek Karst has been part of the UNESCO World Heritage since 1995.

Ten caves are open for tourism, in four of which people suffering from respiratory diseases can be treated, too.

Some 1,851 thousand hectares of Hungary's area were covered by forestin 2005, 14,400 hectares up on the previous year. Our forest cover of nearly 20% is lower than the EU average, which is nearly twice as much as this, but the purpose in the long term is to achieve a forest cover of 25% in Hungary. Measured by the extent of defolia- tion, Hungarian forests are qualified moderately damaged in Europe, although the repeated surveys show an unfavourable trend. 39% of trees are healthy, 40% are slightly, 15% moderately, 3% strongly damaged and 3% died. In 2005 the proportion of healthy and moderately damaged trees lessened by 2–3%, that of strongly damaged by 13%, while the share of slightly damaged and died trees rose by 4 and 11%, respectively.

National water consumption decreased by nearly one quarter in the last ten years, primarily due to the fall in domestic and irrigation use. The decline – and thus the involuntary economising – can largely be explained by the permanent rise in the price of water.

In the analysis of drinking water at water works in 2005, 3% of bacteriological and 2%

of chemical analysis samples were rated

„unacceptable”. The water quality of Lake Balaton has improved, and not only in the inner regions, where the water has been classified as of excellent quality in microbiologi- cal terms, too. The number of settlements

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