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OECD: Hungary economy “prospering” but risks remain
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The Organisation for Economic Co-operation and Development (OECD) acknowledged Hungary’s strong GDP growth, but warned that the economy faces risks such as a labour shortage in a country survey published on Thursday.
Hungary’s economy is “prospering”, OECD said in the report, citing strong domestic demand supported by income gains as well as dynamic business and housing investments, declining unemployment, and broad-based wage increases.
Productivity growth has accelerated, but remains “well below” real wage growth and the rate in the decade before the global financial crisis, it added.
The OECD earlier projected Hungary’s GDP growth would reach 3.9 percent in 2019 and 3.3 percent in 2020.
Outlining external and domestic risks, the report noted Hungary’s vulnerability to the escalation of international trade disputes and their impact on exports, particularly exports of the automotive sector. Continued high wage growth could erode cost competitiveness and unhinge inflation expectations, requiring abrupt policy change, it said. On the other hand, stronger-than-expected productivity gains would bolster the economy’s capability to absorb rapid wage gains, the OECD added.
Hungary continues to attract large inflows of foreign direct investment (FDI), but these have mostly benefited the western and central regions of the country, the OECD said, adding that upskilling, mobility and strong regional growth are needed for securing equitable growth.