“The success of the Hungarian economic model over the past five years has been realised thanks to cooperation between the state and enterprises, and the goal of the Government is to make cooperation even more congenial”, Minister of Foreign Affairs and Trade Péter Szijjártó said at the Figyelő Top 200 business conference.
“Whether you like the Hungarian model or not, or happen to think it’s unorthodox, the fact is that it has transcended the previous method of economic thinking whereby one must choose between making the economy more dynamic and maintaining fiscal discipline”, Mr. Szijjártó explained, adding that “new jobs have been created, the Excessive Deficit Procedure against Hungary has been closed and government debt is being reduced step-by-step”.
According to the Minister, success can be achieved not only via government measures, but also through the success of enterprises: for instance, the employment rate broke a 23-year record this summer with over 4 million 200 thousand people working, which is the result of increased private sector performance. Parallel to this, the unemployment rate fell to an 11-year low of 6.7 percent.
We can be proud of the fact that 5216 billion forints (EUR 16.8bn) in investment arrived in Hungary last year, an increase of 14 percent, which is unprecedented since 1990, Mr. Szijjártó said. The export to GDP ratio increased from 80 percent in 2008 to 91 percent in 1014, reaching 97 percent by the end of June this year, meaning Hungary is well on its way to achieving its goal of having the highest export to GDP ratio in the European Union, he added.
Economic growth is fuelled by the automotive industry, but this is a “good problem”, and although efforts to further diversify the structure of the Hungarian economy are warranted, this should not be achieved “at the expense” of automotive sector performance, the Minister explained. The car industry posted growth of 16 percent during the first six months of this year, and this increase is not just the work of large vehicle manufacturing companies, but is also thanks to small and medium-sized Hungarian enterprises who act as suppliers.
“The Government’s task is to facilitate the highest possible ratio of Hungarian enterprises within the supply chain of large, international automotive industry companies, Mr. Szijjártó stressed.
In his opinion, we must pinpoint the areas where growth is confined and where government measures are required to overstep these barriers.
Going into more detail, the Minister explained that EU funding must be applied more efficiently, in addition to which further tax cuts and greater predictability are required, adding that the rate of personal income tax will be reduced to 15 percent next year and the tax system will continue to focus on consumption-related levies, meaning they will not be a burden to those who want to work more or employ more people.
According to Mr. Szijjártó, as regards foreign investment Europe and Hungary are at a serious competitive disadvantage compared to the United States when it comes to energy costs, and accordingly 2016 will be the year of industrial utility price cuts.
Bureaucratic and administrative burdens must be further reduced, within the framework of which public administration fees will be reduced by 10 billion forints (EUR 32.3M) and deadlines will be shortened. The vocational training system also needs restructuring, in addition to which changes are required within the infrastructural, institutional and logistics support systems, the Minister said. With relating to the latter, Mr. Szijjártó explained that every motorway must reach the national border by 2018, in addition to which 1000 billion forints (EUR 3.23bn) will be spent on transport development until 2020, within the framework of which over 500 kilometres of dual carriageway will be constructed.
The Minister of Foreign Affairs and Trade also spoke about Eximbank’s export stimulating loan programme, which provides a credit line of 21 billion euros to facilitate exports to 94 countries and can also requested by suppliers.
Mr Szijjártó highlighted the fact that the Government would like to conclude more strategic partnership agreements in addition to the 63 already signed. Companies who have concluded such agreements with the Government currently provide work to 195 thousand people in Hungary and 15 thousand new jobs have been created wince the agreements were signed. One of the cornerstones of these agreements is always the increasing of the ratio of Hungarian suppliers, he added.
(Ministry of Foreign Affairs and Trade/MTI)
