Hungarian Rhapsody: How to boost potential growth?
If there’s something that never works in Hungary, then it’s the economy. Unfortunately, this is not only a bad joke, but the reality.
Hungary’s economy was severely damaged by the financial crisis – public debt has soared to almost 80 % of the GDP, national currency (forint) lost more than 25 % versus the euro when the crisis peaked, unemployment rate reached its historical maximum at 10,3 % at the end of 2009 and may even increase in 2010. What structural weaknesses have led to the current situation? Well, inefficient allocation of resources, distortionary taxation system, low employment and high social expenditures are some of them.
This is the bitter truth and the boring numbers, but since every failure holds the possibility of success, let’s be optimistic and forward-thinking. I was thinking of some suggestions that , in my view, may shake up the Hungarian economy and boost the potential growth. Just to make it clear, my goal is not to give a detailed picture of the Hungarian economy, nor to find solutions to every economic challenge, however Hungary’s problems are not unique and may serve as a good lesson for others.
