In the report published on Friday by the Organization for Economic Co-operation and Development (OECD), the institute is mainly upbeat about Hungary’s economic policy measures, but concerning some critical remarks it had ignored a number of key factors.

In “Going for Growth”, an annual publication, the OECD acknowledges that the Hungarian Government has recently implemented several structural reforms that are in line with the organization’s prior recommendations. Among them, the study highlights the dismantling of administrative hurdles, such as the introduction of on-line cash registers and the “greater use of notification procedures and the simplification of professional qualifications”.

The study only examines structural reforms by member countries; therefore it fails to mention the most significant achievement of Hungary’s economic policy: economic growth has been on a balanced and sustainable path since 2013, rising dynamically. In addition, external and internal balance indicators also continue to be favourable.

The OECD notes that the tax wedge in Hungary is high from an international perspective, but recent measures, such as the reduction of the personal income tax rate by 1 percentage point (to 15 percent) and the extension of family tax allowances have helped narrow the tax wedge. They advise the further reduction of the tax wedge, especially for low income earners, albeit the Government had already cut it in a focused way, through the Job Protection Action.  The programme has clearly helped the employment of disadvantaged jobseekers: among the OECD members, in the period 2010-2015 Hungary was the country with the second largest increase in the employment rate, following the Baltic states.

The analysis has also chosen to omit the six-year wage agreement, which stipulates the increase of minimum wage and guaranteed minimum wage for skilled workers in 2017 and 2018, and a concurrent reduction of payroll taxes and a flat-rate corporate income tax. The agreement is expected to significantly shape macro-economic processes in coming years, placing the economy on a faster growth path and reducing the tax wedge – in accordance with OECD’s recommendations.

(Ministry for National Economy)