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Competitiveness Report

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The purpose of the Competitiveness Report is to provide a comprehensive and objective picture of Hungary’s competitiveness. The Magyar Nemzeti Bank published the book entitled ‘Competitiveness and Growth’ in 2016 in order to analyse Hungary’s competitiveness and to explore the possibilities of further progress. The Competitiveness Report examines and evaluates Hungary’s competitiveness position along the principles and proposals laid down in the book. The publication also includes a detailed examination of areas and factors – such as productivity, quantity and quality of human resources, technological readiness, regulatory environment, entrepreneurial attitude or quality of financing possibilities – which usually are given less attention in the Bank’s traditional macroeconomic analyses, although they are determinants in terms of economic developments. We use more than 100 indicators to assess competitiveness, and more than 90 per cent of them are objective ones.

The analysis of competitiveness factors is important for the Bank because they determine the long-term growth opportunities of the economy, which affect current developments as well. These areas and factors, which are basically of structural nature, influence – both over the medium and long term – economic agents’ consumption, savings and investment decisions, potential economic growth, financial positions and, through all of them, expected returns, the price level as well as inflation.

In recent years, the macroeconomic fundamentals necessary for a turnaround in competitiveness consolidated in Hungary, but our Report confirms the finding of international surveys that further steps are needed in order to improve competitiveness. The turnaround in employment has taken place. In the next phase, the improvement in productivity (mainly of SMEs), wage convergence and the freeing of labour reserves have to be set as targets, with possible contributions, inter alia, from the expansion of non-typical forms of employment and the enhancement of the efficiency of government. The state can primarily contribute productivity growth by creating a supportive business and regulatory environment, by further easing the burdens on enterprises and labour as well as by the reduction in state bureaucracy. Companies’ financing possibilities have improved considerably in the recent years, but progress is needed in the fields of banking sector efficiency, operating costs and digitalisation as well.

One of the greatest challenges facing the Hungarian economy is to ensure the adequate quantity and quality of available human capital. In education, it is necessary to transfer competitive and marketable knowledge aiming at the further development of basic skills (including knowledge of foreign languages and computer science as well as basic knowledge of finance and entrepreneurship) as well as the ability of lifelong learning and flexible adjustment to changing market needs. In health care, reforms beyond financing issues in a narrow sense are needed to improve the quality of provision. Efficient improvement may be achieved in the state of health and the number of healthy life years by placing greater emphasis on prevention, for example through the promotion of a healthy lifestyle and the prevention of obesity.

In addition, the Report follows up the implementation of the directions and proposals formulated in the Bank’s book entitled ‘Competitiveness and Growth’. According to our assessment, 8 of the 50 proposals offered in the book have materialised completely or to a great extent, and progressive steps have been taken in the case of another 26.