Will Hungary’s Longstanding Economic Dream Come True?
Gábor Sarnyai 2018.11.13.
Throughout the 20th century, Hungarian politics has been haunted by one question: how can Hungary catch up to the economically advanced countries of the West? It seems the more Hungary’s politicians ponder this question, the more elusive the solution appears.
Hungary’s role model has always been Austria, at least when it comes to communication. When Austria-Hungary split up, the Hungarian national income per capita reached 85 percent of Austria’s GNP. According to World Bank data, Hungary’s per capita GNI measured in purchasing power parity was approximately half of the value of Austria’s in 2015.
How far can Hungary get?
Since 1990, TARKI Social Research Institute has been publishing its Social Report which reflects vital cultural and economic changes in Hungarian society. The government has supported the study since its inception. “Is Europe far away?” author, Péter Szívós, presented his findings to the press. The researchers have compared Hungary’s economic and social indicators with those of two older Member States (Austria and Portugal) and two regional competitors (Poland and Romania).
According to the study, after the era of transitions, Eastern European countries experienced more GDP growth than Western European countries, but Hungary’s results have been the most moderate among CEE countries.
In regard to higher education, Hungary improved its position. When communism collapsed, student enrollment rates were 15 percent, but by 2007, that number increased to 67 percent. Unfortunately, over the last 8 years, Hungary’s number of students has decreased, matching Romania’s.
In terms of life expectancy at birth, each surveyed country improved, but the differences couldn’t be eliminated entirely. In 2016 in Austria, the life expectancy was 81 years. In Hungary, this number was a slightly lower 76. It will be hard, if not impossible, to catch up with Austria. However, it’s plausible that Hungary’s economy could be on the same level as Portugal’s in just ten years.
The Central Bank is hopeful that Hungary can catch Austria by 2030
The Central Bank of Hungary published an optimistic growth report and its director, András Balatoni, presented the document’s main points on InfoRadio.
The report resembles “180 Steps for the Sustainable Convergence of the Hungarian Economy,” an earlier document issued by MNB. The document sets ambitious macroeconomic targets for the year 2030, which, according to the study, could be attainable through the implementation of 180 measures. The study also proves that in light of comparison with international statistics, Hungary’s economic progress should be based on qualitative rather than quantitative growth.
As a result of the competitiveness reform planned by the Central Bank, productivity may improve. In 10 years, nominal wages could double, and with full employment, a GDP growth of 4-4.5% could be reached permanently.
This growth is essential for Hungary to close the gap, Balatoni said. The director also suggested that with a single-digit personal income tax, increased productivity and discovery of hidden economic reserves, Hungary could approach Austria’s level of wage development by 2030.