OECD Economic Surveys: Hungary 2016 (eBook)

Oecd (Autor)

eBook Download: PDF

2016 | 1. Auflage
128 Seiten
OECD Publishing (Verlag)
978-92-64-25595-1 (ISBN)

Infos

This 2016 OECD Economic Survey of the Hungary examines recent economic developments, policies and prospects. The special chapters cover: Bolstering business investment and Enhancing skills for the labour market.

Inhalt

Table of contents 5
Basic statistics of the Hungary, 2014 9
Acronyms 10
Executive summary 11
Strong economic growth has returned 12
Figure: GDP growth 12
Investment has started to pick up 12
Figure: Total investment as a share of GDP 12
Low-skilled have weak labour market outcomes 12
Figure: Employment rates of people with below upper-secondary education 12
Assessment and recommendations 15
Resuming inclusive growth 16
Figure 1. Growth has recovered recently 16
Figure 2. Income levels are still low 17
Figure 3. Growth has resumed 17
Table 1. Macroeconomic indicators and projections 18
The recovery is broadening 18
Figure 4. Macroeconomic imbalances are falling 19
Figure 5. Well-being indicators are mixed 20
Figure 6. Monetary policy has been easing 21
Figure 7. Export market gains reflect improved competitiveness 22
Figure 8. Investment is recovering 23
Figure 9. Labour productivity has fallen markedly since the crisis 24
Figure 10. Total factor productivity remains low 24
Figure 11. The labour market is improving 25
Figure 12. Public work schemes have underpinned the expansion of employment 25
Figure 13. The labour market lacks inclusiveness 26
Figure 14. Minimum wages are high relative to median wages 27
Table 2. Possible shocks to the Hungarian economy 28
Monetary policy is still supporting the recovery 28
Figure 15. Labour shortages have been increasing 28
Figure 16. Monetary policy transmission is hindered by a high share of non-performing loans 29
Financial stability has improved 30
Figure 17. Macro-financial vulnerabilities have diminished significantly since 2007 30
Figure 18. Financial sector vulnerability has declined 31
Putting the debt-to-GDP ratio firmly on a downward path will require further consolidation efforts 32
Table 3. Fiscal indicators 33
Figure 19. Durably reducing public debt will require further reforms 33
Figure 20. Hungary's public sector is relatively large and tilted towards general public services 35
Figure 21. Tax revenues are reliant on consumption taxes and social security contributions 36
Figure 22. VAT revenue loss due to tax avoidance and evasion is above the EU average 36
Population ageing increases spending pressures 37
Table 4. Long-term projections for ageing related spending (% of GDP) 37
Figure 23. Demographic prospects are unfavourable 38
Table 5. Benefit ratios and replacement rates in Europe 39
Bolstering business investment 39
Figure 24. Investment is lower than expected 39
Global value chains benefit relatively few 40
Figure 25. Hungary's participation in the global value chains (GVC) is very high 41
Figure 26. Many small and medium-sized enterprises (SME) have low productivity and innovative activity 42
Frequent changes in the regulatory framework holds back business investment 43
Figure 27. Product market regulation is below average in the OECD 43
Figure 28. Energy prices are high for firms and low for households 45
Figure 29. Telecommunication prices are high for high-usage consumers 46
More investment is needed to achieve environmental objectives 46
Figure 30. Emission intensity is declining 47
Enhancing skills to boost growth 48
Figure 31. The room for further expansion in tertiary education remains high 48
Figure 32. The impact of motherhood on employment is very high 49
Figure 33. Student performance in PISA 2012 has deteriorated 51
Bibliography 53
Annex: Progress in structural reform 55
Progress in structural reform 55
Thematic chapters 59
Chapter 1. Bolstering business sector investment 61
Introduction 62
Investment has fallen due to a lack of opportunities and financing 62
Figure 1.1. Investment is picking up 63
Figure 1.2. Real business investment contracted relatively more than in many other countries 64
Figure 1.3. Investment development is lower than expected 65
Table 1.1. The corporate sector has a high level of debt leverage 65
Figure 1.4. Trends of foreign direct investment in Hungary 66
Business investment has been held back by lack of private funding 67
Figure 1.5. Stock market capitalisation is low 67
Figure 1.6. Venture capital is relatively well developed 68
Figure 1.7. Bank lending rates have declined 68
Figure 1.8. Credit has fallen amidst high shares of non-performing loans 69
The large inflow of inward FDI has reflected favourable policy settings 71
Figure 1.9. Hungary's participation in the global value chains (GVC) is very high 72
Figure 1.10. Foreign-owned firms are substantial investors in tangible capital 73
Figure 1.11. Intangibles account for a low share of investment 74
Figure 1.12. Changing sectoral composition has affected aggregate investment intensity 75
A stronger and more predictable regulatory environment would bolster business investment 75
Figure 1.13. Factors attracting FDI have become similar across the region 76
Figure 1.14. Regulation is high in some areas 77
Regulatory barriers are high in some areas 78
Public institutions and the system of checks and balances need to be strengthened 78
The competition framework has unusual features 80
Better public procurement can enhance the efficient use of EU structural funds 81
The government has increased its stake in energy markets 82
Regulation has increased in the retail sector 83
Figure 1.15. Energy prices are high for industry and low for domestic consumers 84
Figure 1.16. Regulation burden in retail trade is above the OECD average 85
Relatively high telecommunication prices are hampering downstream investments 85
Figure 1.17. Telecommunication prices are high and infrastructure is lacking behind 86
Figure 1.18. Relatively few households have access to a computer at home 87
Further investment in renewable energy is needed to achieve policy objectives 88
Table 1.2. Feed-in-tariffs for renewable energy in 2016 (HUF/kWh) 88
Table 1.3. Feed-in-tariffs for tariffs in Europe 89
Main recommendations for stimulating business investment incentives 90
Bibliograhpy 91
Chapter 2. Enhancing skills to boost growth 95
Economic restructuring has changed the labour market’s skill requirements 96
The education system’s reaction to structural changes has not been sufficient… 96
Figure 2.1. Structural change in employment 97
Figure 2.2. The room for further expansion in tertiary education remains high 98
… while structural problems on the labour market remain unsolved 98
Future changes in labour demand are likely to increase the need for skilled labour 98
Figure 2.3. Education has not been responsive to labour market signals 99
Figure 2.4. Labour shortages are becoming more pronounced 100
Mobilising underused skills 100
Increasing the supply of skills by enhancing women’s labour market participation 100
Figure 2.5. Female employment rates are low at both ends of the age distribution 101
Figure 2.6. Mothers tend to withdraw from the labour market 102
Figure 2.7. Parental leave in Hungary is long 102
Figure 2.8. Enrolment in formal childcare remains low 103
Figure 2.9. The part-time family model is rarely used in Hungary 104
Box 2.1. The Job Protection Act to promote employment growth 105
Table 2.1. Payable public charges of employers offered by the Job Protection Act 105
Upgrading skills of elderly in order to increase their labour market participation 105
Improving labour market prospects for low skilled 107
Figure 2.10. The less educated have lower chances of finding a job 107
Box 2.2. New active labour market policy measures 108
Figure 2.11. Public work scheme jobs are predominantly in regions with high long-term unemployment 108
Figure 2.12. Labour market status 6 months after participating in public work schemes 109
Securing skilled labour supply in the future 110
Figure 2.13. Emigration is low, but has been increasing significantly over recent years 111
Securing future skills formation that meet labour market needs 112
Enhancing the quality of learning and strengthening skills valued in the labour market 112
Figure 2.14. Student performance in PISA 2012 has deteriorated 113
Figure 2.15. Teachers are amongst the lowest paid in the OECD 114
Figure 2.16. Computer skills and language proficiency are weak 115
Selectivity in education is hampering the basis for skills formation 115
Box 2.3. Early tracking in the education system 116
Figure 2.17. School enrolment and graduation rates of minority groups remain poor in Hungary 116
Vocational training provides narrow labour market skills 117
Figure 2.18. Vocational schools are perceived to be of low quality 118
Figure 2.19. Labour market outcomes of vocational school graduates are unsatisfactory 118
Box 2.4. Changes in the secondary education system 119
Tertiary education must be more responsive to the labour market needs 120
Figure 2.20. Graduation rates can be significantly increased through raising completion rates 121
Figure 2.21. Difference in income and labour market outcomes by field of education 121
Figure 2.22. Private returns on tertiary education are high in Hungary 122
Figure 2.23. Students are not entering fields where labour market demand is high 123
Main recommendations to enhance skills 124
Bibliography 124

Textauszug

Chapter 1. Bolstering business sector investment

Strong investment is key for accelerating productivity and income growth. The current business investment-to-GDP ratio is not high enough to markedly accelerate the current low potential growth rate. Moreover, a relatively large share of business investment comes in the form of FDI. This reflects comparative advantages in areas, such as a skilled work force, favourable regulation and taxation. These advantages are challenged as neighbouring countries adopt similar FDI regimes. This means that looking ahead boosting business investment must increasingly rely on stimulating domestic firms’ investment incentives. This could arise through more stable regulation and a more pro-competitive business environment. To that aim, the policy formulation process should be strengthened, exemptions from the competition framework limited, and non-discriminatory access to networks should be secured.

Introduction

Accelerating income convergence requires bolstering growth. To achieve this, production needs to be moved towards best international production practises by improving the economy’s international connectedness, ability to allocate skills, and boosting investments in knowledge based capital, including R&D and other intangibles (Saia et al., 2015). Policies for stimulating business investments are very broad in scope, but have in common that they have to be stable, non-biased, and facilitate new entry. The chapter starts by describing investment developments and the importance of inward FDI. This is followed by an assessment of FDI policies, before considering policies that can make domestic firms more competitive by stimulating their incentives for investing in new products and technologies. Subsequently, network sectors are considered in terms of how they better can support investment opportunities in upstream markets. The chapter ends with an analysis of how investment in renewable energy can be stimulated.

Investment has fallen due to a lack of opportunities and financing

Prior to the crisis in 2009, total investment hovered around nearly a quarter of GDP, before falling by some five percentage points. This was mostly driven by a large contraction in business sector investment. This was accentuated by housing investment falling to an internationally low share of GDP as house prices collapsed (Figure 1.1). On the other hand, public investment was boosted by EU structural funds. The contraction in investment was more severe than in most other countries, but has since recovered (Figure 1.2). Moreover, the relatively close relationship between economic activity and business investment that could be observed prior to the crisis has eroded in the 2010s. As a result, the level of business investment is well below what economic growth would suggest (Figure 1.3). While the current business investment-to-GDP ratio suffices to support the current potential growth rate of around 2%, the rate is insufficient to markedly accelerate income creation and reduce the income gap vis-à-vis the Euro area (OECD, 2015a).

Figure 1.1. Investment is picking up

As a percentage of GDP

1. Non-financial corporations.

2. 2013 data for Chile, Iceland, Korea, Mexico, New Zealand and Switzerland.

3. Gross investment in tangible goods by multinationals in % of GDP in 2012.

4. 2014 data for Hungary and Poland; 2013 data for Chile and Switzerland.

Source: OECD (2016), Analytical Database; OECD (2016), OECD National Accounts Statistics Database; OECD (2015), OECD Statistics on Measuring Globalisation Database.

StatLink  http://dx.doi.org/10.1787/888933349330

Figure 1.2. Real business investment contracted relatively more than in many other countries

1. Non-financial corporations.

Source: OECD calculations based on OECD (2015), National Accounts Statistics Database; Eurostat (2015), National Accounts Database.

StatLink  http://dx.doi.org/10.1787/888933349597

Figure 1.3. Investment development is lower than expected

Simple accelerator model of non-residential investment, value of actual investment in 2007 Q4 = 1001

1. In real terms. 4-quarter moving average applied. Actual GDP and capital stock series are used to calculate the forecast based on 1996 Q1-2007 Q4 estimation. In the estimations, the level of investment is explained by current and lagged changes in real GDP, and replacement investment. For more information on the methodology: OECD (2015), OECD Economic Outlook, Vol. 2015, Iss. 1, June, Annex 3.1.

Source: OECD (2015), OECD calculations based on OECD Economic Outlook: Statistics and Projections Database.

StatLink  http://dx.doi.org/10.1787/888933349490

The decline in business investment can be explained by a number of factors. The crisis induced a sharp reduction in current and expected demand. In addition, financing of new investments became more difficult as profits of domestic firms fell and bank financing became scarce (Government of Hungary, 2015a). Domestic firms’ profits still have to return to their pre-crisis level (Bauer, 2014).

The fall in profitability reflects the crisis as well as the introduction of sector specific taxes, which together with frequent changes (particularly in the aftermath of the crisis) in the regulatory environment (see below) reduced predictability and risk tolerance, dragging down investments (Martonosi, 2013). The banking crisis together with the implementation of additional taxes on banks sharply reduced bank’s willingness to lend.

Even when firms get sufficient demand and potential financing for new investment, they may still be reluctant to invest owing to their high debt (Table 1.1; Lewis et al., 2014). Debt is coming down, but remains above its pre-crisis level (OECD, 2015a) which constitute a drag on investment as long as firms want to improve their balance sheet.

Table 1.1. The corporate sector has a high level of debt leverage

	Debt-to-equity ratio	Share of cash & deposits in total assets (%)	Share of debt securities in debt (%)

Average 99 Q1-07 Q41	2008 Q4	2014 Q32	Average 99 Q1-07 Q41	2008 Q4	2014 Q32	Average 99 Q1-07 Q41	2008 Q4	2014 Q32

Hungary

0.912

1.165

1.033

15.3

12.8

12.2

1.0

1.0

1.6

United States

0.62

0.87

0.58

8.88

7.81

9.21

24.25

20.80

25.84

Euro...

Produkt-Details

• Erscheint lt. Verlag: 6.5.2016
• Sprache: englisch
• Themenwelt: Sozialwissenschaften ► Politik / Verwaltung ► Staat / Verwaltung
• Themenwelt: Wirtschaft ► Volkswirtschaftslehre ► Wirtschaftspolitik
• ISBN-10: 92-64-25595-8 / 9264255958
• ISBN-13: 978-92-64-25595-1 / 9789264255951