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

Gábor Sarnyai 2019.03.05.

The Central Bank of Hungary (MNB) has published its new competitiveness program which consists of 330 points. The 234-page document is a more detailed version of earlier competitiveness packages.

While György Matolcsy was talking about ways to go about boosting the country’s competitiveness at the Hungarian Chamber of Commerce and Industry’s (MKIK) conference, the MNB published its competitiveness program. However, this is not the bank’s first publication on the topic. In July, it published a document called, “180 Steps for the Sustainable Convergence of the Hungarian Economy.” This recently released document can be considered a detailed sequel of previous programs. It expands on the bank’s vision of how Hungary can economically catch up to Austria.

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

The Competitiveness Program, which covers 12 key areas, aims to support the successful convergence of the Hungarian economy by mobilizing the growth reserves in the country’s resources.

The central bank admits that within the framework of the workshop on competitiveness, MNB analyzed the dimension of the economy which is usually outside of the traditional role of central banks.

The 12 chapters of the program cover all areas of competitiveness, including small and medium-sized enterprises, foreign economic strategy, research and development, innovation, retail financial savings, territorial convergence, infrastructure and energy, large care systems (education, health), labor market and demography.

The Master Plan Revealed: How the Hungarian Economy Can Catch Up with Austria’s

The most important goals of the program:

  • The credit-to-GDP level ratio should double; the MNB says companies could use more financial resources.
  • The Hungarian government’s debt should be fully financed from Hungarian sources to eliminate vulnerabilities.
  • The competitiveness of the SME sector should be increased by seven percent per year.
  • The time spent on corporate tax administration will be decreased to 170 hours per year.
  • Wages will be increased by five percent per year.
  • The unemployment rate needs to be below six percent in every county.
  • Ten thousand new exporting SMEs need to be created.
  • The birth rate needs to increase to 110,000 newborn babies per year.
  • A single-digit personal income tax should be introduced.
  • The health of Hungarians needs to be improved via a complete reform of the health system.
  • At least one Hungarian university should be among the 200 best universities in the world.
  • Energy imports need to fall below 50 percent.
  • Hungary should spend two percent of its GDP on research and development.

Govt Debt on the Lowest Level Since the Financial Crises

We cannot catch up to Austria without a complete health care reform 

MNB’s document contains a specific chapter on health care called, “Healthy Society.” These 39 measures sharply contradict the government’s policies on health care. The experts at the central bank used a similar approach as in previous materials – if the health status of the Hungarian people determines the state of the country’s human resources, then it also has an impact on the nation’s economic development. There are three important motifs present in the health chapter of the document:

  • On one hand, it emphasizes the importance of prevention and the need to raise public health awareness.
  • On the other hand, experts believe the entire health system has efficiency reserves. If the government were to use it appropriately, efficiency would improve without increasing the spending level.
  • Thirdly, the material argues for institutionalizing private sources.

The experts would introduce incentives for a healthy lifestyle (support for healthy eating with tax deductions, regular sporting activities, quality work and living environments) and increase taxes on hamburgers, chips, hot dogs and other low-quality foods. The central bank also proposes an important “punitive” instrument: extending patient-based financing methods; if a patient doesn’t go for regular health screenings, then he/she would pay more in social insurance.

The Number of Doctors Practicing in Hungary is at a High – but Where Are They?

Parragh: It is surreal to reach Austria’s standard of living in a decade

The President of the Hungarian Chamber of Commerce and Industry (MKIK) and close ally of the government and PM Orbán, László Parragh, believes that there is no way Hungary could match Austria’s standard of living in a decade. He thinks Orbán’s six-point proposal is more feasible. He believes that Hungary should aim for 75-80% of the Austrian standard of living, as it is more realistic.

Featured Image: György Matolcsy governor of MNB and PM Viktor Orbán/ Via: 24.hu