Recent policy initiatives in Hungary have gone a long way to establishing the necessary conditions for rapid growth and future economic prosperity. A massive programme of privatisation has transferred an unprecedented share of economic activity from the state to the private sector, with the revenues being used to reduce the government’s external debt. Substantial foreign investment has helped firms based in Hungary to penetrate western export markets, and the success of these firms has in turn served to attract more foreign investment. After years of being burdened by bad loans, the banking sector has been cleaned up. Increasingly, the economy responds to market rather than bureaucratic signals and competitive pressures are ensuring that efficiency gains are passed on to consumers in the form of lower prices and wider choice.