Reforms for Stability and Sustainable Growth

An OECD Perspective on Hungary

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EU accession in 2004 has confirmed Hungary’s successful transformation from a centrally planned economy into a functioning market economy operating within the framework of a multi-party democracy. However, the country’s output per capita is still well below the EU average, and public expenditures exceed revenues by a large margin. This report looks at ongoing efforts to restore fiscal balance and promote sustainable growth to accelerate the convergence process. Drawing on the experience of OECD member countries it proposes structural reforms to achieve these objectives, covering the following topics:

• Fiscal policy: Deficit reduction and making taxes and expenditures more growth friendly.

• Health care reform: Improving efficiency and quality of care.

• Pension reform: Providing old-age income security in the face of population ageing.

• Employment and social policies: Making formal employment more attractive.

• Education reform: Improving human capital formation.

• SME promotion:  Increasing competitiveness and fostering successful entrepreneurship.

• Innovation: Fostering rapid productivity growth.

• Energy policy and the environment: Responding to the threat of climate change.

• Public administration reform: Improving the performance of the public sector.

• E-government: Using technical progress to improve public service delivery.

An overview chapter synthesises the findings, highlighting the interdependence of policy actions in the various areas.


E-government: Using Technical Progress to Improve Public Service Delivery

E-government development in Hungary has been driven by the overarching national goal to integrate Hungary in the European Union. Combined with strong political leadership, these efforts have brought results in a short period of time. The progress made by Hungary has not continued after 2006 compared to the other benchmarked countries. Hungary is experiencing a fragmented e-government leadership, lack of budgetary concepts and tools for evaluating e-government investments, limited systematic monitoring and evaluation, and deficient cross-institutional collaboration frameworks. To increase public sector performance using e-government as a tool, Hungary should establish stable political priorities and strategic frameworks that allow for a focus on medium- to long-term implementation, including setting up a simpler governance structure for e-government. Benefits of e-government investment are assessed. Increased benefits realisation of e-government investments could be achieved by improving the budgetary frameworks using current budgetary limitations as a way to push agencies to re-engineer their business processes and to innovate in order to free up resources. Further e-government collaboration frameworks need to be strengthened. A number of additional initiatives could be considered to exploit economies of scale, for example extending the use of e-government building blocks to local government and the establishment of a shared service centre.


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