OECD ECONOMIC SURVEY OF HUNGARY 2019 PROMOTING A STRONGER AND MORE INCLUSIVE ECONOMY Budapest, January 31st 2019 http://www.oecd.org/eco/surveys/economic-survey-hungary.htm
@OECDeconomy @OECD
Key messages • The economy is growing strongly • Policies should address risks to the recovery • Greater inclusiveness would bolster growth • Ageing-related costs are increasing
2
The recovery remains strong Quarterly GDP at seasonally adjusted annual rates 6
4
2
0
-2
-4
-6
-8
2009Q2 2009Q4 2010Q2 2010Q4 2011Q2 2011Q4 2012Q2 2012Q4 2013Q2 2013Q4 2014Q2 2014Q4 2015Q2 2015Q4 2016Q2 2016Q4 2017Q2 2017Q4 2018Q2
3
Domestic demand is driving growth Quarterly % change at seasonally adjusted annual rate 6 4 2 0 -2 -4 -6 -8 -10 -12
Government final consumption
2010
2011
Private final consumption
2012
2013
Gross capital formation
2014
2015
Net trade of goods and services
2016
2017
GDP
2018
4
Employment is at unprecedented levels and unemployment at historically lows % of labour force 14
Index Q1 2010 = 100 130
12
125
10
120 Unemployment rate (left axis)
8 6
115 110
Total employment (right axis)
4
105
2
100
0
2010
2012
2014
2016
2018
95
5
Improving well-being is key Better Life Index, country rankings from 1 (best) to 35 (worst), 2017ยน
20% top performers
60% middle performers
20% bottom performers
Hungary
12
23
25
26
27 30
Work-life balance
Housing
Education and skills
Jobs and earnings
Environmental quality
Income and wealth
31
31
Civic engagement
Health status
31 Social connections
32 Personal security
33 Subjective wellbeing
1. Each well-being dimension is measured by one to four indicators from the OECD Better Life Index set. Normalised indicators are averaged with equal weights. Source: OECD (2017), OECD Better Life Index, www.oecdbetterlifeindex.org.
6
Wages are rising fast Growth (y-o-y) in monthly earnings in the private sector
14 13 12 11 10 9 8 7 6 5 4 3 2 1 0
2010
2011
2012
2013
2014
2015
2016
2017
2018 7
Inflation is on the rise Inflation 7
Inflation tolerance band
Headline inflation
Core inflation
6 5 4 3 2 1 0 -1 -2
2010
2011
2012
2013
2014
2015
2016
2017
1. Core inflation excludes energy and food. Three-month moving average for monthly earnings in the private sector. Source: OECD (2018), OECD Main Economic Indicators (database).
2018
8
Ageing is becoming a challenge Old age dependency ratio Ratio of population aged 65+ per 100 population 20-64 60 50 40 30 20 10 0
2016
2020
2030
2040
2050
2060
2070
1. Data are based on the technical assumptions by the EU AWG, i.e. convergence towards the EU mean. Source : European Commission (2018), "The 2018 Ageing Report - Economic & Budgetary Projections for the 28 EU Member States (2016-2070)", DirectorateGeneral for Economic and Financial Affairs, Institutional Paper 079, Luxembourg. 9
Ageing cost could impact on public debt 200 180 160 140 120
General government debt, Maastricht definition, as a percentage of GDPยน
Baseline Not offsetting increase in age-related costs Consolidation effort Lower GDP growth by 1 % pt per yer
100 80 60 40 20 0 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 10
Macro-policy recommendations
• Gradually increase policy interest rates • Continue to exit from unconventional monetary policy measures • Tighten fiscal policy to avoid overheating of the economy 11
FOSTERING INCLUSIVE GROWTH
12
Hungary attracts foreign investment Stock of inward FDI as a percentage of GDP
100 90 80 70 60 50 40 30 20 10 0
SVN
LTU
OECD
AUT
POL
EURO zone
SVK
LVA
HUN
CZE
EST
Source : UNCTAD (2018), OECD Economic Outlook: Statistics and Projections (database). 13
FDI is concentrated in the west Gross domestic product per capita in HUF million, 2016
14
Overall productivity is low 90
Real GDP per persons employed, in USD thousand, constant prices, 2010 PPPsยน
80 70 60 50 Hungary 40
Austria
Germany
EU28
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
1. PPPs: purchasing power parities. Source: OECD (2018), OECD Productivity Database . 15
Domestic producers could benefit more from foreign investment 250
Domestic value added embodied in foreign final demand per worker In USD thousand
200 150 100
0
LVA POL HUN TUR LTU CHL CZE EST SVK PRT GRC SVN ESP KOR NZL JPN ITA DEU ISR FRA GBR NLD AUT FIN ISL CAN BEL DNK AUS SWE USA CHE LUX IRL NOR
50
Note: Domestic value added embodied in foreign final demand per worker refers to domestic employment embodied in foreign final demand. Business activities also include real estate and rental services. Source: OECD (2018), OECD STAN (database); and OECD (2018), Trade in Value Added (TiVa) (database), October.
16
Continuing to fight corruption is key 80 70
Corruption Perceptions Index 2017 on a scale from 0 (very clean) to 100 (highly corrupt)
60 50 40 30 20
0
NZL DNK FIN NOR CHE SWE CAN LUX NLD GBR DEU AUS ISL AUT BEL USA IRL JPN EST FRA CHL PRT ISR SVN POL LTU LVA CZE ESP KOR ITA SVK GRC HUN TUR COL MEX
10
Source: Transparency International
17
Recommendations to boost growth locally • Allow local authorities to identify and execute projects that develop their local economy. • Give vocational schools greater autonomy to specialise and adjust courses and curriculums to local labour market needs. • Establish a dedicated anti-corruption agency 18
Labour market shortages are starting to bite 88
100
86
90
Capacity utilisation
84
Labour shortage indicatorยน
80
82
70
80
60
78
50
76
40
74
30
72
20
70
10
68
0
2010
2011
2012
2013
2014
2015
2016
2017
1. Percentage of manufacturing firms pointing to labour shortages as a factor limiting production. Source: Eurostat Industry database.
2018
19
Labour mobility is low %
Share of employees staying 10 years or more in the same company or organisation
50 45 40 35 30 25 20 15 10
CZE
SVN
HUN
LTU
LUX
DEU
ITA
AUT
IRL
PRT
BEL
EU
FIN
EST
GRC
LVA
NLD
FRA
SVK
ESP
GBR
DNK
POL
0
SWE
5
20
Poorer regions have fewer jobs Employed persons excluding participants in the Public Work Scheme as a percentage of the populationš
65 60 55
Central Hungary
Central Transdanubia
Western Transdanubia
Southern Transdanubia
Northern Hungary
Northern Great Plain
Southern Great Plain
50 45 40
2011
2012
2013
2014
2015
2016
2017
1. Data refer to the population aged 15 to 74. Source: Adapted from Hungarian Central Statistical Office (2018), "6.2.1.1. Economic activity of population aged 15–74" and "6.2.1.3. Number of employed persons", Tables (STADAT) ; and Ministry of Interior.
21
Higher-skilled workers have more jobs As a percentage of working-age population by region, 2017ยน
90 80 70 60 50 40 30 20
Less than primary, primary and lower secondary education
Northern Hungary
Northern Great Plain
Western Transdanubia
Southern Great Plain
Tertiary education
Southern Transdanubia
Central Central Hungary Transdanubia
1: Regions are ranked in descending order by the employment rates of the population aged 20-64 with tertiary education. Working-age population refers to those aged 20-64. 22 Source: Eurostat (2018), "Regional employment", Eurostat Database .
Many mothers with young children are out of the labour market As a percentage of working-age female population, 2017ยน
100
Mothers with one child below 6 years
Mothers with one child above 12 years
80 60 40 20 0
Hungary
European Union
Average of top 5 EU performers
1. Data refer to population aged 15-64. Source: Eurostat (2018), "Gender equality", Eurostat Database . 23
Recommendations to address labour market challenges: • Continue to reduce public work schemes • Enrol participants and other job seekers in training programmes that leads to jobs • Extend duration of unemployment benefits • Provide geographical mobility support and activation measures • Better work-life balance for mothers:
– Expand the supply of crèches – Reduce parental leave and expand paternity leave 24
CHALLENGES OF AGEING:
25
Public spending on pensions is relatively low A. As a percentage GDP 16 14 12 10 8 6 4 2 0
CZE
LUX
HUN
SVN
BEL
ESP
GRC
PRT
AUT
26
Poor pensioners are found in poor regions Average of full pension provision by county, as a percentage of net monthly earnings, January 2018
27
Ageing-costs will increase Total ageing related spending
As % of GDP 18
16
14
12
10
8
6
2020
2030
2040
2050
2060
2070
Source : European Commission (2018), "The 2018 Ageing Report - Economic & Budgetary Projections for the 28 EU Member States (2016-2070)", DirectorateGeneral for Economic and Financial Affairs, Institutional Paper 079, Luxembourg. 28
People that interrupt their careers have low pensions 100
90
Gross pension entitlements as a percentage of full-career entitlements, mandatory pensions only
80
70
50
HUN GRC CHL TUR MEX POL ISR ISL ITA FIN EST JPN DEU AUT CZE USA KOR NLD OECD PRT SVK BEL SWE CHE SVN CAN LUX DNK ESP NOR FRA AUS IRL NZL GBR
60
29
Low-income retirees slide into poverty % of average monthly net salary
60
Scenario 1: Full career on minimum wage Scenario 2: Short career on minimum wage
50
Scenario 3: Women on minimum wage and having 2 children
40
Poverty line
30 20 10 0
65
70
75
80
85
90
95
100
Age 30
Pension recommendations
• Raise the statutory retirement age to 65 by 2022. Then link to gains in life expectancy. • Introduce a basic state pension for all pensioners. • Other measures include: – Introduce constant accrual rates – Remove all possibilities for early retirement – Secure similar pensions for similar careers 31
Life expectancy is low Years
Life expectancy at age 65
26
22
18
10
LVA HUN LTU SVK TUR MEX CZE EST POL USA CHL DNK OECD DEU NLD IRL SVN PRT GBR ISL FIN AUT BEL GRC SWE NOR NZL KOR ISR CAN LUX AUS ITA CHE FRA ESP JPN
14
Note: The OECD aggregate is calculated as an unweighted average of the data shown. Life expectancy at age 65 is calculated as the unweighted average of the life expectancy at age 65 of women and men. Source : OECD (2018), "Health Status", OECD Health Statistics (database).
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Lifestyles impact negatively on health Among OECD countries, 2017 or nearest year available
%
45 40 35 30 25 20 15 10 5 0
Lowest (MEX)
OECD
HUN
Dailly smoking
Highest Lowest (GRC) (TUR)
OECD
HUN
Alcohol consumption
Highest Lowest (LTU) (JPN)
OECD
HUN
Highest (USA)
Adult obesity
33
0
20
0 MEX CHL SWE CAN GBR DNK NZL TUR USA ESP ISR IRL ISL ITA PRT NLD NOR AUS FIN GRC SVN CHE OE… EST LUX BEL LVA SVK FRA POL LTU CZE HUN AUT DEU KOR JPN
14
MEX TUR NLD DNK NOR AUS IRL SWE USA CHL BEL ISL GBR ISR SVN ESP GRC POL EST SVK OE… NZL PRT LVA LTU ITA CAN AUT FIN CHE FRA LUX DEU CZE HUN KOR
Health care is highly hospital-centered A. Hospital beds
Per 1 000 population, 2017 or nearest year available2
12
10
8
6
4
2
B. Average length of stay in hospital In days3
2016
15
10
5
34
The shortages of health workers is especially severe in poor rural areas Unfilled GP practices/100 000 people
35
Long-term care is under developed A. Public expenditure on LTC by type of service As a percentage of GDP, 2015 or latest available 6 Institution-based (health sector)
Home-based (health sector)
Social sector
5 4 3 2
NOR
NLD
FIN
BEL
SWE
AUT
GBR
DNK
IRL
FRA
ITA
LUX
CZE
DEU
LTU
SVK
SVN
EST
HUN
ESP
PRT
POL
LVA
0
GRC
1
Source : European Commission (2018), "The 2018 Ageing Report - Economic & Budgetary Projections for the 28 EU Member States (2016-2070)", Directorate-General for Economic and Financial Affairs, Institutional Paper 079, Luxembourg.
36
Health recommendations • Reduce hospital stays by:
– enhance outpatient care – concentrate inpatient care in fewer, better equipped and more specialised hospitals.
• Increase hospitals’ autonomy and update the DRG tariffs to adjust supply in line with demand changes • Strengthen GPs’ gatekeeper and coordinator roles by increasing pay-for-performance financing • Further promote group practices for GPs • Integrate the various long-term care systems. • Use cash benefits and vouchers to improve access to home and institution-based long-term care 37
Environmental outcomes can be improved, particularly particles emissions Particles emissions Mean annual concentration of PM2.5 (Âľg/mÂł)
30 25
Hungary
20 15
OECD
10 5 0 1999
2001
2003
2005
Source : OECD (2018), Green Growth Indicators (database).
2007
2009
2011
2013
2015 38
Greening growth recommendations
• Use road tolls and car taxes that include vehicles’ environmental performance • Introduce congestion charges and strengthen public transport • Use fiscal incentives to replace inefficient and high-emission heating systems
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For more information
http://www.oecd.org/eco/surveys/economic-survey-hungary.htm Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.
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