news letterOur mobile application

Weekly newsletter

A Competitor Has Emerged for the Central Bank’s Competitive Packages

Gábor Sarnyai 2019.03.07.

The Central Bank of Hungary has published several competitiveness programs since last summer. But this week the Minister of Finance Mihály Varga and the Minister of Innovation László Palkovics unveiled a new strategy.

Despite operating in different roles previously, PM Orbán has assigned the ministers new responsibilities. It’s Mihály Varga’s job to maintain the four percent growth of the GDP, Palkovics’ duty to further transform vocational training and Matolcsy’s central bank’s task to “lay out” a plan for the Hungarian economy.

Will Hungary’s Longstanding Economic Dream Come True?

The Finance Ministry’s program consists of general initiatives, common issues and proposals, and concrete ideas accompanied by target dates and schedules. Now, it’s up to Orbán to choose which plan to implement.

“The Program for a Competitive Hungary package” consists of nearly 100 pages and was assembled with the help of the National Competitiveness Council.

Fact

The National Competitiveness Council includes the Hungarian Chamber of Commerce and Industry (László Parragh), the head of the American and German industry chambers to Hungary (Farkas Bársony and Dale Martin), the Hungarian country manager of McKinsey consulting company (Levente Jánoskuty), the Hungarian Investment Promotion Agency (Róbert Andik), economist Magdolna Csáth and Mol-leader Zsolt Hernádi.

This wide range of contributors demonstrates the government’s intentions of cooperating with market actors.

The competitiveness program sets goals in six areas, suggests deadlines, details when each measure should be implemented and predicts when the program will begin impacting the Hungarian economy. The six areas are:

  • Taxation
  • Employment
  • Public administration
  • Health care
  • Education
  • Corporate environment

The government aims to fulfill its promises by cutting the number of taxes from 60 to 40 by 2020. Corporate and private tax administration will be further reduced by 2021, and the economy will be made more transparent through the enlargement of the online invoicing system and the introduction of e-invoicing. By the end of 2022, work-related contributions will be further reduced.

According to the government, an additional 200 thousand — or potentially 700 thousand – people could enter the labor market via hidden human reserves. The government is focusing on the efficient utilization and integration of students, new mothers and senior citizens in the workforce.

Hungary Aims to Match Austria’s Standard of Living Using 330-Point Plan

The Finance Ministry will improve and streamline public administration by reducing the number of public sector employees by the end of 2021. In addition to rationalizing and reorganizing public policy areas, this would create an “efficient system of public sector operation” and would further digitize the state by the end of 2022.

The program concludes with a brief synopsis detailing the predicted growth of the Hungarian GDP and explaining the extent to which the state would have to implement the program points. It wouldn’t come cheap, however: this year, the cost would reach upwards of HUF 146 billion and HUF 562 billion by 2021. Thankfully, it’s predicted to decrease to HUF 516 billion by 2023.

Orbán Announces 6 Points Plan To Make Hungary Successful

However, the package’s authors believe the steps will have growth-enhancing effects that outweigh their budget costs. By implementing structural reforms, the Hungarian economy could grow by 0.7 percentage points by 2023 and the Hungarian GDP could increase by three percent.

On the featured photo: Finance Minister Mihály Varga