Among the Hungarian challenges of this decade, the continuation of economic catching-up is a top priority. In addition to domestic savings, FDI and EU funds, this will require the Hungarian National Bank’s (MNB) targeted loan programs. These could reopen if the central bank and the government work together to beat inflation. For the latter, the budget needs to return to equilibrium and the government needs to make a full turnaround in competitiveness.
At the request of the prime minister, the MNB developed and published a program for a turnaround in competitiveness half a decade ago. It is also a program to increase productivity, and thus a scenario for a new, quality phase of sustainable catching-up.
Although part of the program was launched — 42 percent, according to our calculations — most of it was frozen. This is reflected in the fact that the competitiveness measured by the MNB did not improve during the effective crisis management in 2020/2021, we remained in 18th place within the EU27.
While we have achieved a better position in crisis management, we have performed poorly in terms of competitiveness and productivity growth, which will determine the opportunities of the decade. As a result, the budget falls short of the expected additional sources of revenue from the GDP surplus. This is the budget boomerang: a turnaround in competitiveness sabotaged by the ministry responsible for the competitiveness turnaround penalizes the budget ministry where the two coincide.
If we do not move forward quickly and significantly in terms of productivity and competitiveness, financial balance will not be restored. Failure to do so could break growth over the decade and stop catching up. The turn of productivity leads to the key to the decade, i.e. to curb inflation, because the essence of this is the expansion of the supply of domestic goods, including both quantity and quality.
In addition to domestic savings, FDI and EU funds, the MNB’s balance sheet could be an important financial source for the decade. However, this can only be reopened after a successful fight against inflation, for which there is only one way, a change in the economic model. It is precisely by overcoming inflation that the Hungarian economy can prosper in this decade, but we must begin to curb inflation immediately.
We need to acknowledge that we can only avoid the failures of the 1970s and 1980s if we move now to a more efficient model within the market economy system.