4 Condition of Hungarian Economic Development in the light of alternative development and competitiveness Indicators The generally accepted measure of economic development, that is the gross domestic product and analogous indicators, focus only on the narrower dimensions of development and wealth, i.e. on the historic economic performance. They do not show, among others, the non-financial and subjective aspects of wealth, and also disregards the issues of income distribution and sustainability. In addition, the gross domestic product says little about the future growth potential and the drivers of an economy. Based on alternative complex indicators, which also consider social and environmental aspects, in a global comparison, Hungary shows higher state of development than suggested by the per capita gross domestic product or its position in rankings that focus on economic competitiveness. In terms of quality of the environment, the knowledge-based economy and income inequalities, Hungary belongs to the top 20 per cent of the countries. The indicators examining state of development in a broader sense – particularly the indices containing the education dimension and examining life expectancy at birth – also reflect that in the case of Hungary the social inequalities mostly appear in the access to public services and healthy conditions of life. The multi-dimensional competitiveness rankings show a mixed picture of Hungary. The indicators (WEF, IMD), most of which are based on corporate manager surveys, rank Hungary lower than its actual economic state of development measured by the GDP per capita. By contrast, the Doing Business survey, which is based on purely objective indicators, ranks the Hungarian economy higher. Hungary’s position in the competitiveness rankings has been relatively stable since the crisis. Most indicator schemes appreciate the improvement of the domestic economic environment and the recovery of the macroeconomic balance. On the other hand, based on the subindicators measuring the institutional environment and the micro-level competitiveness Hungary is in the second half of the regional field and our position is deteriorating. According to the global city rankings covering the large cities of the world, Budapest excels the most in terms of innovation; beside this, favourable costs of living is another factor that distinguishes the Hungarian capital from its competitors. In addition, it is also above the average in the global competition of cities in terms of prosperity, while the financial centre position of Budapest is markedly weak. This chapter presents certain alternative development and competitiveness indicators, which slightly modify the view on the state of development and growth potential of the Hungarian economy, as depicted by the development of GDP. After the outline of Hungary’s global position based on eleven indicators (Chart 4-1), we assess the development path of Hungary based on two indices related to social development and on three competitiveness indicators, in a regional comparison, also reviewing the individual components of these indicators. As regards social progress, we 88
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review two alternative complex indicators in more detail, which satisfy the following criteria of reliability and comparability: • the sample covers at least 80 countries, • available in time series of 4-5 years, as a minimum, • contains the core indicators that determine quality of life the most, and • among their sub-indicators they also consider new values of the economy, such as freedom, entrepreneurship, transparency or good governance.
