Reforms for Stability and Sustainable Growth

An OECD Perspective on Hungary

image of Reforms for Stability and Sustainable Growth

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.


SME Promotion: Increasing Competitiveness and Fostering Successful Entrepreneurship

Small and medium-sized enterprises (SMEs) in Hungary have great potential that still needs to be realised. Their weight in the economy (nearly 69% of employment and over half of sales and value added), their job creation and their capacity for innovation make their improved performance essential for reaching the government’s growth objectives. Their average size is unusually small and their productivity is weak. Few Hungarian SMEs are innovative or internationally competitive. Indeed, human resources in Hungarian SMEs are often under-qualified, have weak training and technical education, and inadequate R&D skills. Structural differences among SMEs across regions in Hungary are significant. This chapter analyses how effectively the government’s Strategy for the Development of Small and Medium-sized Enterprises (2007-13) can contribute to increasing SME competitiveness in Hungary. The specific issues discussed are: (i) Why and in which sense is the situation and performance of Hungarian SMEs unsatisfactory, in particular with regard to their competitiveness? (ii) What can be done to stimulate the contribution of SMEs to sustainable growth, given the constraints imposed by fiscal consolidation? (iii) Is the Strategy appropriate to address the current situation? Are the targets pursued realistic and relevant?


This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error