IMF: Hungarian Incomes Catching up with the EU Average

Hungary is making great progress in catching up with the EU average in terms of income, but the country needs urgent policy reforms as it faces new economic challenges, according to a new IMF (International Monetary Fund) analysis, Euractiv reports.

Hungary’s per capita income has grown in line with efforts to close the income gap with the EU average, and wages have risen from 66% of the EU average in 2010 to 76% in 2022. However, a recent IMF analysis shows that this progress has led to persistent and significant regional income inequalities, with Budapest, the capital, outperforming all regions. The least developed regions (in the south and north) have seen little or stagnating growth. These regions lag behind the national average not only in terms of income but also in a number of fields such as education, digital transition, infrastructure and health.

Budapest leads the way in terms of green jobs, with a GDP per capita of around 5.0% of the EU-27 average and a green jobs rate of around 3.0%.

In contrast, the most lagging regions of Northern Great Plain and Southern Transdanubia, where GDP per capita is well below the EU average, have a green jobs rate of only 0.7-0.8%.

The IMF says the country faces new challenges in terms of economic disparities. The Hungarian economy, like other economies in the world, is undergoing a digital and green transition, with different proportions across regions due to different economic structures, and the gap could widen in the near future.

To bridge this gap, the analysis suggests targeted policy interventions to ensure that the benefits of both economic growth and the digital and green transition are more evenly distributed.

This includes investing in digital infrastructure and education in lagging regions, as well as encouraging private green investment. The IMF also encourages anti-corruption efforts and investment in public institutions. Similar conclusions were reached in the European Commission’s Cohesion Report earlier this year. According to Euraciv, the Ministry of Public Administration and Territorial Development is already working on to introduce targeted aid structures to tackle regional disparities.

Via Euractiv; Featured image: Pexels