Further structural reforms needed in Hungary

The EBRD recommended to Hungary further structural reforms on the labor market, education and healthcare, as well as productivity, the EBRD said in its annual Transition Report. Hungary suffers from one of the worst labor shortages in the EU, the EBRD said, pointing out EC surveys that nine out of ten companies mention labor shortages as the key factor limiting industrial production. The labor shortages represent risk to future economic growth as it threatens the companies’ expansion plans, the EBRD noted. It accordingly called for higher-quality active labor market policies to free up labor reserves, arguing that the government has had limited success in shifting employed in its public work program to the primary labor market.

Education and health results in Hungary are weaker than the EU average, which is on account of relatively low effectiveness of the state services, the EBRD said. Improving the education and healthcare system will strengthen Hungary’s competitiveness, it advised and called for a more active role of the Competitiveness Council in solving the challenges in these two areas. The EBRD also recommended improvements in the productivity of the SMEs, which we think the government has started to address. The measures should be focused on stimulating innovation and value added, the EBRD said, adding that the productivity differential between SMEs and large companies remains higher than in other EU countries.

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