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MNB: Hungary’s competitiveness in the EU ranking has deteriorated

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MNB: Hungary’s competitiveness in the EU ranking has deteriorated

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Hungary’s performance deteriorated in nine of the 14 examined areas, including key areas for the future, such as the quality of human capital and digitalization.

Hungary’s competitiveness deteriorated by two places in 2023 compared to the previous year, and slipped back to 19th place among the 27 EU countries, according to the central bank’s 2023 Competitiveness Report.

After three years of rising, Hungary achieved 46.6 points last year based on the MNB Competitiveness Index, after 47.9 points the previous year.

With this, Hungary’s relative competitiveness position fell below the average of the Visegrad countries (46.7 points), below the EU average (51.4 points) and the average of the five northern member states with the most sustainable growth trajectory (61.4 points).

Hungary’s performance deteriorated in nine of the 14 examined areas, including key areas for the future, such as the quality of human capital (education and healthcare) and digitalization.

The result of the MNB’s own competitiveness summary is in line with international surveys – IMD competitiveness ranking, WIPO Global Innovation Index – which also show deterioration.

There was a significant decline in the activation of household savings and foreign trade and economic structure, but performance also deteriorated in the areas of the green economy and competitive energy use.

The MNB measured improvement in five areas: the largest in the SME strategy and modern infrastructure.

Most of the indicators that make up the index have significant reserves, such as reducing energy dependence, increasing the proportion of renewable energy sources, expanding credit penetration, increasing digitalization, and increasing the domestic added value of exports. In the areas of a knowledge-based and healthy society, results can be achieved by increasing health expenditures or increasing the proportion of people with higher education.

Instead of a growth model that focuses on stimulating demand, a growth model that stimulates the supply side, is based on competitiveness, and is driven by knowledge and technology is needed, ensuring balance indicators, this is also important because competitiveness goes “hand in hand” with the development of a country.

In its report, the central bank identified four areas that are most critical in terms of economic catch-up.

Within the financial system, there is significant room for increasing prudent credit penetration, deepening financial digitization, and reducing the operating costs of the financial sector.

Wider application of digital solutions within the SME sector is essential, and a successful digital transition also requires improving the skills of the population.

There are still significant reserves in improving human capital, Hungarian productivity and wage levels are among the lowest in the EU, wages can only be increased in parallel with productivity.

Hungary’s high energy dependence is one of the main challenges, and its mitigation is key to reducing the vulnerability of the economy.

The central bank’s competitiveness report covers 14 areas and contains 160 indicators, 95 percent of which are objective indicators.

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