Introductory remarks by Andrew Dean, Deputy Director
Chapter 1: Fiscal consolidation dominates the policy agenda
The government deficit reached another election-year peak in 2006 and fiscal consolidation has become the focus of policy. This first chapter of the OECD’s 2007 Economic Survey of Hungary begins with examination of the impact of the poor budgetary record on the economy, why previous governments have failed to adequately address the problem and the prospects of success in the latest consolidation programme. Raising Hungary’s low employment rate also remains a significant policy challenge. The chapter examines progress in unemployment, disability and early-retirement schemes, as well as reforms to active labour market policy and the new system of minimum wages. The chapter also reviews developments in business policies, in particular the ease of doing business and competition issues, as well as progress in environment policy.
Chapter 2: Assessing the government strategy for fiscal consolidation
This chapter takes an in-depth look at the Hungarian government’s consolidation programme. The plan is ambitious, the deficit was over 9% of GDP in 2006 and the aim is for a deficit below 3% in 2010. The various new measures to tighten fiscal discipline in budget processes are examined and suggestions for further changes are made. Revenue-raising measures have been necessary for the initial phase of consolidation but in the longer term there is a need to get back on track with reducing tax burdens on businesses and households. The spending freezes are proving difficult to maintain but reasonable progress is being made on the wide range of structural reforms, though further reforms need to be considered.
Chapter 3: Encouraging sub-national government efficiency
Hungary’s counties and municipalities face difficult challenges. Participation in cost-cutting structural reforms initiated by the central government means cutbacks to administrative overheads and tough decisions in public services. At the same time, there are also challenges in modernising local infrastructures and in making full use of the EU funds for development projects. This chapter first looks at how meeting these challenges can be helped by better budgeting, in particular regarding the transparency and oversight of accounts. Financing arrangements are also examined and this reveals a general problem of complexity. Assessment of spending responsibilities suggests room for improving the roles of counties and regions and a need for cutbacks in central-government influence on service provision and public-sector wages at the local level.
Chapter 4: Improving reconciliation between work and family
Hungarian family policy focuses on providing generous options to take time off work to look after children. This system not only contributes to Hungary’s low employment rate but encourages long separation from the labour market, has largely failed to significantly influence fertility rates and is relatively expensive to run. This chapter looks at how to shift the policy focus towards reconciling work and family life. Reasons for under-provision in childcare by local governments are discussed and recommendations for further central-government intervention to improve supply are made. Recommendations for reform are also made regarding the complex system of family cash benefits and leave allowances.
How to obtain this publication
The complete edition of the Economic survey of Hungary 2007 is available from:
For further information please contact the Hungary Desk at the OECD Economics Department at firstname.lastname@example.org. The OECD Secretariat's report was prepared by Philip Hemmings and Alessandro Goglio under the supervision of Andreas Wörgötter.