The S&P upgrade can convince the last sceptics that Hungary has achieved a positive economic trend reversal, Minister for National Economy Mihály Varga said at the 54th Conference of Hungarian Economists in Kecskemét.
Aiming to maintain steady growth of 3-4 percent of GDP requires more measures, he stressed. The Government’s adequate economic policy has resulted in major positive U-turns on several fields, but the Government must tackle new challenges. The Cabinet is aiming to switch growth engines into higher gear through supporting high added value-producing sectors, boosting R&D resources and – as much as the budget permits – through contributing to development projects. Low productivity, which indicator is well below the EU’s average level, is a major impediment to economic growth. Supporting SMEs is yet another key task, and to this end new proposals are being worked out.
Although employment data have improved impressively – the unemployment rate fell from some 12 percent in 2010 to 5 percent – regional differences must not be disregarded, he added. Unemployment has become almost non-existent in Western Hungary, whereas in eastern regions it still exceeds 8 percent. The Government is bolstering labour mobility through a low-rent housing programme, travel and housing incentives. Parallel to unemployment, labour shortages are becoming more and more pressing in certain sectors, Mihály Varga said, calling it one of the most important tasks to overhaul the vocational education system in a successful way, adapting it to economic needs. The Government is to spend some HUF 156bn on developing the vocational and adult education systems until 2020.
Among economic policy challenges Mihály Varga also mentioned the fact that average wages in Hungary are well below that of the EU. Thanks to measures introduced in recent years, however, Hungarian wages have closed the gap with regional salaries, and the average net wage has increased by 22.3 percent since 2010. The Government may remedy this issue by reducing taxes on labour, but the Minister emphasised that persistent labour shortages would force enterprises anyhow to pay higher wages, especially in sectors producing high added value goods.
Brexit is another issue waiting to be addressed soon, and regarding which Hungary must continue efforts on improving economic cooperation within Europe.
Although state debt is still too high, even in regional comparison, the debt-to-GDP ratio has fallen sharply in the past five years. Fiscal deficit could also be reduced to below 3 percent of GDP in a way that has allowed economic momentum to remain robust.
The S&P upgrade announced yesterday has also acknowledged this achievement. The decision, the Minister said, improves Hungary’s investor environment. This success is the result of hard work by many, for which they deserve to be thanked.
(Ministry for National Economy)
