OECD Economic Surveys: Hungary

English
Frequency
Every 18 months
ISSN: 
1999-0529 (online)
ISSN: 
1995-3461 (print)
DOI: 
10.1787/19990529
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OECD’s periodic surveys of the Hungarian economy. Each edition surveys the major challenges faced by the country, evaluates the short-term outlook, and makes specific policy recommendations. Special chapters take a more detailed look at specific challenges. Extensive statistical information is included in charts and graphs.

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OECD Economic Surveys: Hungary 2016

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Author(s):
OECD
06 May 2016
Pages
128
ISBN
9789264255951 (PDF) ; 9789264256057 (EPUB) ;9789264255944(print)
DOI: 
10.1787/eco_surveys-hun-2016-en

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This 2016 OECD Economic Survey of the Hungary examines recent economic developments, policies and prospects. The special chapters cover: Bolstering business investment and Enhancing skills for the labour market.

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  • Basic Statistics of the Hungary, 2014

    This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.The economic situation and policies of Hungary were reviewed by the Committee on 30 March 2016. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 13th April 2016.The Secretariat’s draft report was prepared for the Committee by Jens Høj and Gabriel Machlica from the OECD secretariat, and Edit Huszár, seconded from the Hungarian Ministry of the National Economy, under the supervision of Pierre Beynet. Statistical research was provided by Taejin Park with general administrative support provided by Anthony Bolton. The previous Survey of Hungary was issued in January 2014.Information about the latest as well as previous Surveys and more information about how Surveys are prepared is available at www.oecd.org/eco/surveys.

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  • Executive summary

    Macroeconomic imbalances are being corrected with the public debt-to-GDP ratio falling and the current account moving to a surplus. Financial vulnerabilities have been reduced, but non-performing loans still hamper bank lending. Growth has been strong since 2012. However, income levels are still well below those in more advanced economies and as economic slack disappears, sustaining growth will require structural reforms to strengthen the business sector and upgrade skills.

  • Assessment and recommendations

    Prior to the 2008 global crisis, the Hungarian economy was performing well compared with other countries in the region, partly due to unsustainable external lending, which led to macroeconomic imbalances (Figure 1). Subsequently growth was slower than in most other countries in the region, before accelerating strongly more recently. Moreover, imbalances have been reduced, notably the current account deficit was turned into a surplus and exposure to foreign currency denominated loans was sharply reduced. Nonetheless, the level of real GDP only surpassed its pre-crisis level in 2015. In addition, there has been no significant income convergence vis-a-vis the five richest European countries since the crisis, leaving Hungarian per capita incomes among the lowest in the OECD (Figure 2).

  • Progress in structural reform

    The objective of this Annex is to review action taken since the previous Surveys (January 2014) main recommendations.

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    • Bolstering business sector investment

      Strong investment is key for accelerating productivity and income growth. The current business investment-to-GDP ratio is not high enough to markedly accelerate the current low potential growth rate. Moreover, a relatively large share of business investment comes in the form of FDI. This reflects comparative advantages in areas, such as a skilled work force, favourable regulation and taxation. These advantages are challenged as neighbouring countries adopt similar FDI regimes. This means that looking ahead boosting business investment must increasingly rely on stimulating domestic firms’ investment incentives. This could arise through more stable regulation and a more pro-competitive business environment. To that aim, the policy formulation process should be strengthened, exemptions from the competition framework limited, and non-discriminatory access to networks should be secured.

    • Enhancing skills to boost growth

      Skill requirements in the labour market have significantly changed over the past two decades. The restructuring of the economy is making the labour market increasingly knowledge-based. The education system has reacted to this structural change, but as the pace has been relatively slow, many graduates remain without adequate skills and insufficiently prepared to apply knowledge in unfamiliar settings. Moreover, strong selectivity early in the education system reinforces student’s socio-economic background, leading to an excess of low skilled workers with poor labour market prospects. This contributes to persistently low employment rates and low productivity gains, slowing down the income convergence process. The education system needs to improve learning outcomes by better aligning student qualifications with labour market needs. Improving overall educational outcomes would also make the education system more equitable and inclusive. Bolstering the supply of skills requires lifelong learning and improving the access to labour market to those who have left the education system without proper skills. In return, this will also increase on-the-job training, which is a key driver of acquiring competences after graduation. In addition, mobilising untapped skill resources, particular educated younger women, would raise employment, which is needed to confront the labour market problem arising from population ageing.

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