OECD Economic Surveys: Hungary 2024
![image of OECD Economic Surveys: Hungary 2024 image of OECD Economic Surveys: Hungary 2024](https://assets.oecdcode.org/covers/100/795451e5.jpg)
After a strong demand-based recovery following the COVID-19 pandemic, economic activity declined amid high inflation. Growth has restarted in mid-2023 and inflation is receding, but fiscal and monetary policies need to work hand-in-hand to fight remaining inflationary pressures and recreate fiscal space to finance future spending needs.
Productivity growth has slowed since the mid-2000s and structural reforms that facilitate new firm entry and exit and a wider take-up of digital tools are needed. Recent reforms to the anti-corruption and public integrity framework will sustain investor confidence if they are fully implemented.
Social transfers keep income inequalities and poverty low but should be better targeted to those most in need. Women face large employment and pay gaps compared to men and intergenerational mobility is limited. Further expanding access to childcare facilities for young children and improving the education system would help to address these challenges.
Hungary’s green transition can build on past progress but needs to accelerate. This will require more electricity supply from low-carbon sources, with price signals acting as a catalyst. Restructuring energy support by moving from price caps to more targeted cash transfers to vulnerable households would strengthen incentives for energy efficiency improvements and reduce fiscal costs.
SPECIAL FEATURE: GREEN TRANSITION
Towards more inclusive growth
Income inequalities and the risk of poverty are limited in Hungary. This is largely related to existing social transfers. Nevertheless, there is room to achieve the same result in a more cost-effective way by improving the targeting of those transfers. At the same time, inequalities of opportunities are a substantial issue. Women face significant employment and pay gaps compared to men. Moreover, social mobility from one generation to the next is limited, which is related to the education system. Public education spending is low in international comparison and students’ achievements are closely related to their socio-economic background. The COVID-19 pandemic also revealed weaknesses in the social protection of workers. Addressing them would require devising a permanent short-time work scheme that could be activated rapidly during recessions, as well as relaxing eligibility conditions for unemployment benefits and extending their duration, at least during recessions.
- Click to access:
-
Click to download PDF - 552.20KBPDF