Budapest University of Technology and Economics,
Chief Economist, Századvég Gazdaságkutató Zrt.
DSc, University Professor,
Budapest University of Technology and Economics
Published in: Public Finance Quarterly 2016/3 (p. 360-381.)
SUMMARY: The aim of this paper is to understand and provide reasoning for the strategic changes in Hungarian economic policy after 2010. High levels of foreign indebtedness and internal imbalances have necessitated the strategic changes in economic policy in Hungary after 2010. Due to the strategic changes results have been reached as follows. Decreasing internal imbalances: employment rate increased by 9 precentage points, tax burden of SMEs decreased by 9.1 percentage points; wage ratio increased due to income redistribution from sectoral taxes to wage tax allowances; as a result net wages and minimum wage increased in real terms by 10% and 14% between 2010–2015. Decreasing external imbalances: NFL decreased by 40% of GDP between 2010–2015; foreign currency denominated state debt declined from 49% to 30% of GDP; state-owned shareholding increased by an estimated 5% of GDP between 2010 and 2014 mostly in utilities, critical infrastructure and oligopolistic and monopolistic sectors. Following the diagnosis of this paper, the measures after 2010 constitute a coherent economic policy strategy. The paper argues that current challenges of the Hungarian economy are deeply rooted in the past decisions and that the economic policy model after 2010 aims to address these challenges.
KEYWORDS: Transformation, Transition Economies, Unorthodoxy, Foreign Indebtedness, Internal Imbalance
JEL CODES: 057, P52, E60