The six-year wage agreement, tax cuts, Hungary’s industrial development programme, vocational education reform and measures initiated by the National Competitiveness Council are strategic pillars of Hungary’s economy policy, thanks to which Hungary’s long-term competitiveness may improve further. As a result of the mutually beneficial effect of these measures, the country may have a higher investment rate even without substantial FDI, and thus an economic environment can be created that ensures steady GDO growth in the future, Minister for National Economy Mihály Varga said earlier today at the Tatra Summit conference.

At a panel discussion which he attended with his colleagues from the V4, Mihály Varga gave an overview of achievements of Hungary’s economic policy, noting that results of the six-year wage deal brokered last November became already clearly visible this year as wages had increased significantly, and as a consequence payroll taxes would be reduced by another half percentage point next year on top of a 2 percentage point-cut introduced earlier this year.

The Government is expecting that wage hikes will persuade low income earners to improve their skills and enterprises to improve productivity. Employees can thus more easily make the transition from low added-value jobs to companies offering high added-value jobs. In addition, rising wages mitigate the outflow of Hungarian labour force, and – combined with tax cuts – they boost consumption and investment, Minister Varga pointed out.

Thanks to the work of the Government-initiated National Competitiveness Council, administrative burdens related to the setting up of an enterprise have been reduced, and construction permit procedures required for industrial and agricultural projects have also been simplified. These pro-competitiveness economic policy measures are laying the groundwork for an economy in which investment and output may continue to grow even without FDI and a lower inflow of EU funds, he stressed.

Because to lower contributions due to Brexit and rising expenditures driven by the costs of migration and EU border protection, the EU budget is to fall by as much as EUR 20-25bn compared to the current figures.

Therefore, in the next programming period, the amount of cohesion and agricultural funding aimed for the region may be cut back, despite the fact that these funds better fit the economic characteristics of CEE countries than, for example, the European Fund for Strategic Investments (EFSI) initiative does, Mihály Varga stated.

That is why it is crucial to ensure that the financing of new tasks and the EFSI does not take away resources from structural and agricultural funds. Moreover, new ways must be found for less developed regions that allow them more access to the EFSI, he said.

(Ministry for National Economy)