Hungary

Description

Table of contents Assessment and recommendations I. Recent trends and prospects Overview Figure 1. Macroeconomic performance Growing exports contribute to an acceleration in GDP Table 1. Quarterly gross domestic product Figure 2. The climate in the private sector Table 2. Quarterly gross domestic product bysector Labour market conditions continue to improve Figure 3. Employment, unemployment and the labour force Table 3. Regional labour market developments Table 4. Earnings peremployee The disinflation process pauses temporarily Figure 4. Consumer price developments Figure 5. Components of inflation Box 1. The government’s 2000 anti-inflation programme The external balance stabilises Figure 6. Trade performance Figure 7. Customs versus balance of payments trade data Figure 8. Cumulative current account deficit Table 5. Current account ofthebalance ofpayments Table 6. Merchandise trade balance onacash-flow andaccruals basis Box 2. Accounting for trade on an accruals basis in the balance of payments Table 7. Financial account ofthebalance ofpayments Table 8. Capital flows inthebalance ofpayments The short-term outlook Table 9. Short-term projections II. Macroeconomic management Monetary policy Figure 9. The Forint in its fluctuation band Interest and exchange rate developments Figure 10. Interest rate developments Figure 11. Monetary conditions Figure 12. Yield curves Money and credit growth Figure 13. Exchange rate interventions Box 3. Changes in the compulsory reserve requirement Table 10. Money andcredit Policy options Fiscal policy Measurement issues Box 4. Off-budget quasi-fiscal instruments Table 11. Alternative measures ofthegeneral government balance Table 12. General government accounts, OECD basis Table 13. Gross public debt The 1999 and 2000 budgetary outcomes General government Figure 14. Cumulative central government balance Table 14. Consolidated general government revenue and expenditure, OECD basis Central government Table 15. Central government accounts – unconsolidated, GFS basis Social security Table 16. Balance ofthesocial security funds, GFS basis Local governments Table 17. Local government accounts, GFS basis The 2001-02 budget Box 5. The Széchenyi plan Table 18. The medium-term budget outlook Assessment III. Progress in structural reform Table 19. Structural surveillance Product markets Privatisation Table 20. Companies managed byÁPV Rt., bysector Foreign direct investment Figure 15. Foreign direct investment by region Trade policy Table 21. Geographical breakdown oftrade flows Network industries Telecommunications Electricity Gas and oil Sustainable development Summing up Financial markets The banking sector Figure 16. Real credits Figure 17. Sectoral interest rates Table 22. Outstanding loans byrisk category Box 6. Postabank Table 23. Pre-tax net earnings in the banking sector Table 24. Breakdown ofbanking assets byownership Box 7. Non-bank credit institutions The stock market Table 25. Central andeastern European stock markets Figure 18. Liquidity of the Budapest Stock Exchange Figure 19. Regional stock market indices Financial market supervision and regulation In sum Labour market policy Recent developments Figure 20. Regional labour markets Wage setting Figure 21. Wage drift Table 26. Monthly earnings byeducational attainment intheprivate andpublic sectors Figure 22. Minimum wage developments Unemployment and related benefits Working-time flexibility Active labour market policies Education and training Scope for further action Public sector Tax policy Box 8. Chronology of major tax reforms The tax system in an international context Figure 23. The overall tax burden in OECD countries Table 27. The structure oftaxation bytype oftax Personal income tax Self employed Social security contributions Table 28. Social security contributions of top wage earners Indirect taxes Table 29. VAT productivity andeffective VAT rates Figure 24. Distribution of the implicit VAT subsidy Corporate income tax Table 30. Tax incentives Table 31. Required pre-tax rates of return to capital in manufacturing (cost of capital) Figure 25. Average tax rates by level and type of income Local government taxes Tax administration Table 32. Tax arrears Discussion Box 9. Tax policy and EU accession Healthcare Figure 26. Life expectancy Box 10. Managed-care pilot project Looking forward IV. Coping with ageing Introduction The scale of the demographic problem Table 33. Fertility and life expectancy Box 11. The impact of different demographic assumptions Figure 27. Population scenarios Figure 28. Demography and employment Figure 29. Employment/population ratios for men and women Public support for the elderly The healthcare system for the aged Social assistance for older persons Figure 30. Pension benefit recipients by type of benefit The old-age pension system Table 34. Participation inmandatory private pension funds Box 12. The social-security pension system Box 13. The privately managed pension funds The economic implications of ageing under existing institutional arrangements Macroeconomic implications Table 35. Growth rates ofemployment, productivity andGDP Table 36. Membership and assets of Hungarian pension funds Fiscal impacts Figure 31. Dependency ratios Healthcare expenditure Figure 32. Demand for health services Social assistance spending Public pensions Figure 33. Social security deficit: sensitivity to employment and productivity growth Figure 34. Social security deficit: sensitivity to demographic assumptions Figure 35. PAYG balance with lower contribution rates Policy priorities Structures and institutions for the elderly population Fiscal consolidation Figure 36. The evolution of healthcare supply Employment enhancing policies Box 14. The Romani minority Figure 37. Sensitivity of the PAYG balance to revenue-enhancing reforms Creating a co-ordinated policy framework Summing up Box 15. Increasing prosperity in an ageing society: an overview of recommendations Notes Glossary Bibliography Annex I: Operations of the NBH Table A1. Instruments of the NBH applied on a regular basis Annex II: General government accounts: cash-flow versus accrual concepts Annex III: Potential output growth until 2005 Table A2. Sensitivity analysis Notes Annex IV: Medium-term projections Table A3. Direct costs oftax andspending measures Annex V: Calendar of main economic events Statistical annex and structural indicators Table A. Selected background statistics Table B. Supply anduse ofresources Table C. Labour market indicators Table D. Costs andprices Table E. Monetary indicators Table F. Balance of payments Table G. Financial markets Table H. Non-financial corporations withdouble entry book-keeping List of Boxes Box 1. The government’s 2000 anti-inflation programme Box 2. Accounting for trade on an accruals basis in the balance of payments Box 3. Changes in the compulsory reserve requirement Box 4. Off-budget quasi-fiscal instruments Box 5. The Széchenyi plan Box 6. Postabank Box 7. Non-bank credit institutions Box 8. Chronology of major tax reforms Box 9. Tax policy and EU accession Box 10. Managed-care pilot project Box 11. The impact of different demographic assumptions Box 12. The social-security pension system Box 13. The privately managed pension funds Box 14. The Romani minority Box 15. Increasing prosperity in an ageing society: an overview of recommendations List of Tables Table 1. Quarterly gross domestic product Table 2. Quarterly gross domestic product by sector Table 3. Regional labour market developments Table 4. Earnings per employee Table 5. Current account of the balance of payments Table 6. Merchandise trade balance on a cash-flow and accruals basis Table 7. Financial account of the balance of payments Table 8. Capital flows in the balance of payments Table 9. Short-term projections Table 10. Money and credit Table 11. Alternative measures of the general government balance Table 12. General government accounts, OECD basis Table 13. Gross public debt Table 14. Consolidated general government revenue and expenditure, OECD basis Table 15. Central government accounts – unconsolidated, GFS basis Table 16. Balance of the social security funds, GFS basis Table 17. Local government accounts, GFS basis Table 18. The medium-term budget outlook Table 19. Structural surveillance Table 20. Companies managed by ÁPV Rt., by sector Table 21. Geographical breakdown of trade flows Table 22. Outstanding loans by risk category Table 23. Pre-tax net earnings in the banking sector Table 24. Breakdown of banking assets by ownership Table 25. Central and eastern European stock markets Table 26. Monthly earnings by educational attainment in the private and public sectors Table 27. The structure of taxation by type of tax Table 28. Social security contributions of top wage earners Table 29. VAT productivity and effective VAT rates Table 30. Tax incentives Table 31. Required pre-tax rates of return to capital in manufacturing (cost of capital) Table 32. Tax arrears Table 33. Fertility and life expectancy Table 34. Participation in mandatory private pension funds Table 35. Growth rates of employment, productivity and GDP Table 36. Membership and assets of Hungarian pension funds Tables Annexes Table A1. Instruments of the NBH applied on a regular basis Table A2. Sensitivity analysis Table A3. Direct costs of tax and spending measures Tables: Statistical Annex and Structural Indicators Table A. Selected background statistics Table B. Supply and use of resources Table C. Labour market indicators Table D. Costs and prices Table E. Monetary indicators Table F. Balance of payments Table G. Financial markets Table H. Non-financial corporations with double entry book-keeping List of Figures Figure 1. Macroeconomic performance Figure 2. The climate in the private sector Figure 3. Employment, unemployment and the labour force Figure 4. Consumer price developments Figure 5. Components of inflation Figure 6. Trade performance Figure 7. Customs versus balance of payments trade data Figure 8. Cumulative current account deficit Figure 9. The Forint in its fluctuation band Figure 10. Interest rate developments Figure 11. Monetary conditions Figure 12. Yield curves Figure 13. Exchange rate interventions Figure 14. Cumulative central government balance Figure 15. Foreign direct investment by region Figure 16. Real credits Figure 17. Sectoral interest rates Figure 18. Liquidity of the Budapest Stock Exchange Figure 19. Regional stock market indices Figure 20. Regional labour markets Figure 21. Wage drift Figure 22. Minimum wage developments Figure 23. The overall tax burden in OECD countries Figure 24. Distribution of the implicit VAT subsidy Figure 25. Average tax rates by level and type of income Figure 26. Life expectancy Figure 27. Population scenarios Figure 28. Demography and employment Figure 29. Employment/population ratios for men and women Figure 30. Pension benefit recipients by type of benefit Figure 31. Dependency ratios Figure 32. Demand for health services Figure 33. Social security deficit: sensitivity to employment and productivity growth Figure 34. Social security deficit: sensitivity to demographic assumptions Figure 35. PAYG balance with lower contribution rates Figure 36. The evolution of healthcare supply Figure 37. Sensitivity of the PAYG balance to revenue-enhancing reforms