This is the first time that Romania is ahead of Hungary in terms of labour productivity, based on EU statistics. Even though labour efficiency per hour worked in Hungary is still ahead of Romanians; however, the recently published statistics might refer to some structural problems in the Hungarian economy.

Labour productivity is a crucial indicator because it has a major impact on the competitiveness of the country concerned. As the Hungarian news portal G7 reports, productivity is a multi-factor value, the magnitude of which is influenced by how skilled the workforce is, how much capital there is in the economy, and how advanced the technology is in a sector or national economy.

On Monday, Eurostat updated its data series with 2019 figures that show how much value a worker produces in each country in an EU comparison. Basically, GDP per employee is calculated in each Member State and then compared to the EU average, expressed as a percentage.

In Hungary, this indicator was 71.6% of the EU average in 2019, which means that last year only two Member States, Bulgaria and Latvia had lower labour efficiency.

One decade ago, we were ahead of six more countries on this list; however, by now the poorly performing Romania – whose productivity in 2010 was barely half that of the EU average – also left Hungary behind.

The most common explanation for the deterioration of domestic labour productivity is the public works program, which attracted very low-efficiency labour into the labour market. This can be confirmed by the fact that the domestic indicator started to improve again as the program contracted in recent years.

Based on the analysis of Eurostat, in 2019, an employee in the Hungarian economy produced an average of about $37 per hour, which overtakes Romania, Croatia and Bulgaria. The discrepancy between the two statements can be explained in part by the fact that one calculates the value produced in terms of employees and the other in terms of hours worked; still, people work more in these states than in Hungary.

The problem of Hungarian productivity is also seen in Hungarian economic policy, based on the analysis of the central bank.

Accordingly, before the crisis in 2008, the level of domestic productivity was above the regional average, but the situation caused a lasting stagnation of productivity in the case of Hungary, as a result of which Romania could outrun Hungary. 

That is why increasing the productivity of the sector is the central point of the Hungarian National Bank’s SME strategy. The only issue is that the biggest problems were experienced not among SMEs, but rather large corporations. While the latter are still much more efficient than SMEs, the scissors are narrowing in part because their productivity has steadily deteriorated in recent years. This is partly the reason why in recent decades, economic policy based on supporting the investments of multinational companies, is increasingly criticised in Hungary.

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