Hungary: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Hungary
IMF Staff Country Reports, December 5, 2019
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- Hungary: 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Hungary
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Bibliographic details
- Published: December 5, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781513521404.002
Overview
- Publication date: December 5, 2019
- Main finding: In an increasingly uncertain global economic environment, Hungary’s growth registered one of the highest rates in Europe in 2018.
- Current cyclical position: The economy now appears to be running above capacity and wages are growing rapidly amid historically low unemployment.
- Medium-term outlook: It is thus likely that growth will slow down over the medium term.
- Policy assessment: Policies have reduced vulnerabilities substantially; however, measures to support the targeted fiscal consolidation could be more ambitious to ensure that room for fiscal policy manoeuvre is rebuilt.
Macroeconomic outlook and risks
- Growth dynamics:
- 2018: Hungary registered one of the highest growth rates in Europe.
- Medium term: Growth is likely to slow as the economy runs above capacity.
- Labor market and inflationary pressures:
- Wages are growing rapidly amid historically low unemployment.
- Wages are outstripping labor productivity growth (phrase preserved as in source).
- External and export performance:
- Slower export growth noted as a factor weighing on outlook.
Structural challenges and competitiveness
- Key constraints:
- Wages outstripping labor productivity growth.
- Shortcomings in the business environment for small and medium enterprises.
- Need to address demographic challenges.
- Government response:
- The government’s competitiveness program contains important elements.
- Recommended structural focus areas:
- Improving the business environment.
- Enhancing the legal and regulatory framework.
- Increasing labor force participation.
- Policy objective:
- Improvements in competitiveness are needed to sustain rapid income convergence.
Policy recommendations and fiscal stance
- Fiscal consolidation:
- Measures to support the targeted fiscal consolidation could be more ambitious to ensure that room for fiscal policy manoeuvre is rebuilt.
- Supply-side reforms:
- Supply-side reforms can help sustain the momentum and address structural constraints.
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