Economic reform in Hungary needs to address the various hindrances faced by the country, which in turn is affecting the nation’s economic progress. It is said that Hungary is very susceptible to shocks in the market. She should be better equipped to withstand the adverse situations better. The article below reveals the areas, which need economic reform in Hungary.
The possible measures have also been suggested. The Hungarian government embraced economic reform after the collapse of communism in the Eastern European regions around 18 years back. The country has appealed to a number of foreign investors. More importantly, Hungary has succeeded in tapping its human resources to the optimum.
Investments in future are likely to grow because it is anticipated that development, growth as well as integration are what the country is heading for in the future. Despite the fact that Hungary has remained in the good books of the foreign investors, it does not seem to suffice.
Economic reform in Hungary pertaining to vital fiscal as well as monetary policies are required to be revamped for the further improvement of the Hungarian economy. When the country is facing an upswing usually the following the measures are adopted. The government calls it the Irish Model.
This model is characterized by:
Decrease in expenses of the state government
Avoidance of distortions in the financial markets
The country also boasts of a labor force, which is extremely skilled and assists in attracting foreign investment, which are of high value. By improving infrastructural make up of the country, maintaining regulations, which are well regulated, Hungary has been described as a hub for investments.
In the event when the economic conditions are backsliding, the country may embrace the following. There is a sudden halt age of fiscal reforms and growth in the economy becomes sluggish.
Economic reform in Hungary should also take care of the capital markets. An upheaval in the capital market hampers foreign investments, which is regarded as the driving force of Hungarian economy. Whatever may be the case, economic reform in Hungary ought to aim at a sustainable growth in the economy, which would also attempt to reduce rate of unemployment in the country.
Economic reform in Hungary comprising fiscal policies plays an important role in the capital markets. There are few threats, which the country has been facing. One of the prominent ones being that the nation has state debt, which is quite high whereas international reserves are not enough.
It has been estimated that in the next two years, public debt would go up to 70% thereby violating the norms of the Maastricht ceiling, which freezes the public debt at 60%.
It is very natural for any emerging economy to have a deficit in the current account. However, if the deficits become uncontrollable, the economy of the country may be subject to a lot of chaos and turmoil. The deficits in current account were attended to by the adoption of several measures pertaining to taxes. The value added tax or VAT as well as corporate taxes were raised to overcome the deficit. The government hopes to reduce the deficit to 3% of the gross domestic product or the GDP by the year 2008. This is another economic reform in Hungary. Few suggest that increasing taxes, may harm the growth in the economy. Public finances would be under pressure owing to the tax raise. It is suggested that current account deficits are largely due to the fact that there has been increase in the credit market. As a result of this an “asset price bubble” has resulted in real estate market in particular .
Last Updated on : 26th June 2013