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2004 OECD Economic Surveys: Hungary 2004

image of OECD Economic Surveys: Hungary 2004

In its 2004 review of Hungary’s economy, OECD finds that Hungary has achieved rapid growth and is catching up with other European economies, but that these achievements in themselves are presenting new challenges.  The survey makes a series of recommendations for strengthening the macroeconomic framework, for boosting labour force participation, and for sustaining high productivity growth. 

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Product Market Competition and Economic Performance

The establishment of competitive markets has been one of the cornerstones of Hungary’s structural policy over the past decade, alongside a successful policy of attracting foreign investment in some sectors. In terms of privatisation, competition law, sector-specific regulation, subsidies and public procurement, the approach to competition in many respects now differs little from many OECD countries. However, certain sectors of the economy inevitably get left behind in the wake of such rapid structural change. Hungary has effectively developed a two-speed economy. On the one hand it has a highly competitive and technologically advanced export sector, largely foreign-owned and run. On the other hand it has a large number of relatively small-scale, low productivity domestically owned manufacturing and service industries that have been less exposed to competition in the course of the transition process. Also, in terms of network industries, significant efforts are still needed to create competitive markets in electricity, gas and telecommunications and the process of liberalisation in rail and postal services has barely begun. With much of the policy work to fulfil EU-accession guidelines over, policy-makers can now focus their attention on some of the fundamental issues the country needs to address to ensure its living standards continue to catch-up to those of leading OECD countries...

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