OECD Economic Survey of Hungary 2024 - Presentation

OECD ECONOMIC SURVEY OF HUNGARY

Budapest, 6 March 2024

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Growth has slowed amid high inflation

Monetary policy should continue easing gradually as inflation falls

Note: Harmonised index of consumer prices (HICP) inflation.

Source: Eurostat.

Note: Inflation is calculated according to the national Consumer Price Index (CPI).

Source: Hungarian Central Statistical Office (HCSO), OECD projections.

Further fiscal consolidation is needed

Governement balance (% of GDP)

Structural primary government balance (% of potential GDP)

Note: The primary government balance is the government balance before accounting for debt servicing costs. The structural primary government balance is the primary government balance adjusted for business cycle fluctuations.

Source: Hungarian Central Statistical Office (HCSO), OECD projections.

Reforming pensions will be key to maintain fiscal sustainability

Gross government debt, Maastricht definition

No pension reform

No primary deficit from 2024 onwards

Primary surplus of 1.3% of GDP from 2024 onwards

Note: The primary government surplus/deficit is the government balance before accounting for debt servicing costs. Scenario 1 (No pension reform) adds expected ageingrelated costs on top of Scenario 2 in which there is no structural primary deficit from 2024 onwards. A structural primary surplus of 1.3% of GDP from 2024 onwards is considered in scenario 3.

Source: OECD estimates.

Raising productivity and strengthening institutions

Labour productivity performance needs to improve

Note: Labour productivity is defined as value added divided by total hours worked by employees and self-employed workers based on the total economy.

Constant prices and 2015 Purchasing Power Parities (PPPs) are used to compare labour productivity across countries and time.

Source: OECD Database on productivity statistics.

Stronger competition is needed to boost productivity

1 (most concentrated) to 7 (least concentrated), 2019

Note: A lower score indicates that markets are more concentrated.

Source: World Economic Forum - The Global Competitiveness Index 4.0 2019 dataset.

Stronger digital skills would facilitate the diffusion and use of digital technologies

Note: In Hungary, 64% of firms with 10 or more persons employed have a very low Digital Intensity Index, compared to 44% on average in the EU.

Source: EU Digital Intensity Index, Eurostat Database on Digital Economy and Society.

The new anti-corruption framework should be fully implemented

Note: The OECD average is an unweighted average of the corruption perception indices of all OECD countries.

Source: Transparency International.

Improving equalities of opportunity

Fiscal support programmes should be better targeted

Transfers from public social security to working-age individuals

Share of transfers going to different income quintiles, 2021 or latest

Note: Transfers from public social security include accident and disability benefits, old-age cash benefits, unemployment benefits, maternity allowance, child and/or family allowance, housing benefits, and other means-tested benefits. All transfers are measured at the household level and adjusted for household size.

Source: OECD Income distribution database.

Better access to formal childcare would enable more women to work

Note: Hungarian official statistics put the proportion of children under 3 in formal childcare at 18.1% in 2022, above the 12.9% Eurostat figure based on the EU-SILC survey.

Source: Eurostat.

Income mobility requires further improvements in education

Expected number of generations for the children from the bottom 10% of the income distribution to reach average income

Source: OECD (2018): “A broken social elevator? How to promote social mobility ”. Data are available for 24 OECD countries.

Making the green transition happen

The pace of emission reductions should be stepped up to reach targets

Note: Greenhouse gases (CO2, N2O, CH4, HFC, PFC, SF6, and NF3) are expressed in CO2 equivalent. The chart refers to gross emissions and therefore excludes absorptions from land use, land use change and forestry (LULUCF). The 2050 target is consistent with net zero emissions (accounting for LULUCF absorptions) by 2050. The 2030 target is a 50% reduction of gross emissions compared to 1990, as set in Hungary’s National Energy and Climate Plan and in line with EU objectives.

Source: EU Statistical Pocketbook, OECD calculations.

Carbon rates are low, weakening price signals: they should increase

Net effective carbon rates, all sectors, 2021

Note: Net effective carbon rates consist of emission trading prices, carbon taxes, and fuel excise taxes minus fossil fuel subsidies. The OECD average is an unweighted average of net effective carbon rates across OECD countries.

Source: OECD (2022): “Pricing greenhouse gas emissions. Turning climate targets into climate action.”

Moving from price caps to targeted cash transfers would increase incentives to lower energy consumption

Note: For each country, energy consumption is corrected for changes in meteorological conditions across years.

Source: Odysee-Mure, https://www.odyssee-mure.eu/

Expanding low-carbon energy sources would help to reduce emissions and improve energy security

Note: Mtoe = Million tonnes of oil equivalent. Fossil fuels include coal, crude oil and natural gas. Other renewables include solar, wind, hydro and geothermal energy sources. Due to data limitations, imported electricity cannot be broken down into primary energy inputs. Fossil fuels may be used directly or first transformed into electricity.

Source: International Energy Agency, World energy balances, OECD calculations.

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Disclaimers:

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