OECD Economic Surveys 2003-2004: Hungary

Table of contents......Page 5
Assessment and recommendations......Page 10
I. Key issues and challenges......Page 24
Figure 1.1. Hungary’s export-led growth......Page 25
Table 1.1. Sectoral decomposition of growth......Page 26
Table 1.2. Cumulative net FDI flows in OECD countries......Page 27
Export activity and growth in the recent downturn......Page 28
Table 1.3. Recent trends and projections of output, demand and prices......Page 29
Key policy issues......Page 30
Figure 1.3. Productivity, wage and competitiveness indicators......Page 31
Background......Page 33
Figure 1.4. Inflation and deficit targets in the run-up to the euro......Page 34
Policy issues......Page 35
Figure 1.5. An unbalanced macroeconomic policy mix......Page 36
Figure 1.6. Labour force participation and employment......Page 37
Figure 1.7. Employment rates by age and gender......Page 39
Box 1.1. The Roma population......Page 40
Figure 1.8. Employment rates by region......Page 41
Conclusion......Page 42
Figure 1.10. Percentage of the population that has attained tertiary education, by age group......Page 43
Notes......Page 44
Bibliography......Page 45
Fiscal policy......Page 46
Figure 2.1. Government spending......Page 47
Final 2002 deficit: strong electoral spending......Page 48
Table 2.1. Budget plans and outcomes, 2002 to 2004......Page 49
Box 2.1. Budget accounting methods......Page 50
Table 2.2. Public-sector pay increases 2001-2003......Page 51
Table 2.3. Consolidated general government revenue and expenditure, ESA95 account......Page 52
Box 2.2. The main changes to taxation and transfer systems, 2003......Page 53
2004 budget plan: some bold measures in the right direction......Page 55
Public expenditure: bolder structural reforms needed......Page 57
Monetary policy......Page 58
Background: from crawling-peg to inflation targeting......Page 59
Figure 2.3. Inflation, exchange rates and interest rates......Page 61
Events in 2002 and 2003: speculative attacks and prospects of missed inflation targets......Page 60
Box 2.5. The speculative attack on the forint in January 2003......Page 62
Figure 2.4. Policy rates and risk premia......Page 63
Figure 2.5. Five-year forint and euro government benchmark yields......Page 65
Notes......Page 66
Bibliography......Page 67
Labour market issues......Page 68
Table 3.1. Recommendations for further structural reform and actions taken......Page 69
Figure 3.1. Total tax wedge and GDP per capita in OECD countries......Page 72
Figure 3.3. The increase in minimum wage......Page 74
The role of the transfer system......Page 75
Figure 3.4. Disability benefit recipiency rate......Page 77
Table 3.2. Principal benefit and wage subsidy schemes for working-age adults......Page 78
Wage formation......Page 81
Tax policy......Page 82
Table 3.3. The structure of tax revenues: an international comparison......Page 83
Table 3.4. Tax wedges on labour income: an international comparison......Page 85
Business taxes......Page 87
Figure 3.5. Local business tax......Page 89
Indirect taxes......Page 90
Tax administration and collection......Page 91
FDI policy......Page 92
Box 3.1. The principal headings of the Smart Hungary programme......Page 93
Table 3.5. Tax incentives for investment......Page 94
SME policy......Page 95
Transport policy......Page 97
Financial sector issues......Page 98
Ongoing trends in the banking sector......Page 99
Figure 3.6. Balance sheet total to GDP ratio: an international comparison......Page 100
The market for mortgage-based housing loans......Page 101
Figure 3.8. Bank lending to households......Page 102
Notes......Page 104
Bibliography......Page 107
Assessment of transition......Page 110
Table 4.1. Output, employment and productivity......Page 111
Figure 4.1. Mark-ups by industry sector1......Page 112
Table 4.2. Import penetration in manufacturing......Page 114
Figure 4.2. Relative price levels and GDP per capita in OECD countries......Page 115
The domestic sector......Page 116
Figure 4.3. Average labour productivity......Page 117
Gauging the potential impact of reform......Page 118
Key features of the competition legislation framework......Page 119
Regulatory policy......Page 122
Box 4.1. The role of the acquis communautaire in network industry regulation......Page 124
Selected network industries......Page 123
Figure 4.4. International comparison of electricity prices, 2001......Page 127
Figure 4.5. International comparison of gas prices, 2001......Page 130
Table 4.3. Telecommunication prices in Hungary......Page 133
Competitive industries......Page 135
Table 4.4. Outlet density in Hungarian retail shopping centres......Page 136
Table 4.5. Regulation of entry and conduct: professional chambers......Page 138
Other policies affecting competition......Page 139
Table 4.6. Total expenditure (consumption and investment)......Page 142
Conclusion......Page 143
Box 4.2. Recommendations to enhance competition......Page 144
Notes......Page 146
Bibliography......Page 153
Performance......Page 156
Box 5.1. The integration of policies across sustainable development areas......Page 157
Table 5.1. Main indicators: climate change......Page 158
Table 5.2. Emissions and sectoral indicators......Page 159
Policy......Page 161
Conclusions......Page 162
Performance......Page 163
Table 5.3. Main indicators: air pollution......Page 164
Policies......Page 165
Performance......Page 166
Table 5.4. Performance indicators: sustainable retirement income......Page 167
Policy......Page 169
Figure 5.1. Simulation of pension wealth on retirement as a multiple of average earnings......Page 171
Conclusions......Page 172
Notes......Page 173
Bibliography......Page 174
Table A.1. Current account of the balance of payment......Page 176
Table A.3. Capital flows in the balance of payments......Page 177
Annex B. Economic convergence criteria for participation in the euro area......Page 178
Table C.1. Consolidated general government accounts, ESA95 basis......Page 180
Table C.3. Consolidated general government accounts......Page 181
Table C.4. Consolidated general government accounts......Page 182
Annex D. Gauging the potential impact of regulatory reform enhancing competition......Page 183
Table D.1. A calculation of the effects of pro-competitive regulatory reform in selected industries......Page 184
Annex E. Key features of the PAYG and two-pillar pension systems......Page 185
Table E.1. Key features of the PAYG and two-pillar pension systems......Page 186
Table E.2. Financial flows of the main institutions in the pension system......Page 187
Table E.3. Tax treatment of pension contributions and tax benefits......Page 188
Annex F. Calendar of economic events......Page 189
Glossary of acronyms......Page 192