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Impacts of a changing world-economic environment (including Brexit) on the EU economy and on the Hungarian economy and state budget (in Hungarian)

A tanulmány első része a nemzetközi gazdasági és növekedési folyamatokat tekinti át a világgazdaságban 2021 közepén, megvizsgálva, hogy hoz-e fordulatot a 2021. év, milyen hatása volt a válságnak a világkereskedelemre, mennyire sikerült a negatív hatásokon úrra lenni, illetve melyek azok a kockázatok, amelyek veszélyeztetik a jövőbeli növekedést. A tanulmány megállapítja, hogy a növekedés szempontjából lefelé mutató kockázatot az infláció erősödése és a monetáris feltételek szigorodása, valamint a pandémia újbóli fellángolása jelenthet. Mindegyiknek jó esélye van ugyan, de egyelőre az előrejelzők többsége azzal számol, hogy ezek a kockázatok kezelhető keretek között maradnak. A bizonytalanságot fokozza a koronavírus új mutánsainak megjelenése, ami számos országban bizonyosan újabb szigorításokat fog kikényszeríteni. Továbbra is nagyon nagy probléma, hogy a fejlődő országokban az oltási kampányok nagyon lassan haladnak, és ezekben az országokban az egészségügy felkészültsége a járvánnyal szemben nagyon kezdetleges. Az idei növekedés még jelentős mértékben támaszkodik a fiskális ösztönzőkre, amelyek kivezetése a jövőre lassúbb növekedéshez vezethet.

Az Európai Unió nemzetközi környezetének vizsgálata során részletesen foglalkozunk a Brexit hatásaival. A fő következtetés, hogy a brit gazdaságot 2020-ban és 2021-ben két negatív keresleti és kínálati sokk érte: a Brexit és a koronavírus-járvány. Amíg a Brexit elsősorban a nemzetközi kereskedelembe kerülő termékeket előállító és szolgáltatásokat kínáló ágazatok helyzetét nehezíti, addig a pandémia elsősorban a belföldi piacra orientálódó szolgáltatásokét. A két sokk regionális és foglalkoztatási következményei eltérőek. Makrogazdasági szinten a Brexit és a pandémia hatásai összeadódnak. Annak ellenére, hogy a kereskedelmi és együttműködési szerződés révén sikerült elkerülni a megállapodás nélküli kiválást az EU-ból és az azzal kapcsolatos zavarokat a bilaterális kereskedelemben, a Brexit hátrányosan érintette mind az Egyesült Királyságot, mind az Európai Uniót

A második fejezet az Európai Unió, illetve az euróövezet gazdasági helyzetével foglalkozik, megállapítva, hogy a kilábalás ez év második negyedében megindult, azonban a magas adósságállomány, a gyorsuló infláció és egyes országok szerkezeti, versenyképességi problémái kockázatot jelenthetnek a jövőre nézve. Az új EU tagállamok vonatkozásában is megállapítható, hogy a világjárvány és az azt követő gazdasági válság egy lassuló kelet-európai régiót ért el, s sok olyan problémát hozott a felszínre, amelyek már régóta nyomasztják a térséget. A harmadik fejezet a magyar államháztartás helyzetét taglalja, megállapítva, hogy a koronaválság miatt kialakult világgazdasági feltételek elsősorban a szolgáltatásforgalmon, azon belül is főként a turizmuson keresztül rontották a magyar gazdaság helyzetét. A magyar államháztartás 2020-ban a GDP 8,1%-át kitevő hiányt halmozott fel, az eredetileg előirányzott 0,8%-os hiánnyal szemben. Az óriási többlethiány nem a válság miatt elmaradt költségvetési bevételek miatt alakult ki, hanem a kiadások elfutása következtében.

Client:
Fiscal Council of the Hungarian Parliament, Contract No. KVT/7-1/2021
Duration:
August 2021
Project leader:
Katalin Nagy
Participants:
Rozália Bogó, Zoltán Matheika, Miklós Losoncz, Katalin Nagy, Éva Palócz, Péter Vakhal
Dokuments:

The impact of COVID-19, sustainability and socio-economic development on Hungary’s competitiveness (in Hungarian)

The pandemic has set under way such economic and social developments that diverted national economies from their previous path. Experts unanimously agree that economic growth relying on the rapid expansion of household consumption cannot be maintained in its current form due to its negative externalities. The study analyses the background and the impact of the crisis in five dimensions, all from the point of view of sustainability.

Government debts surged in the first waves of the epidemic. By analysing the measures mitigating the impact of economic recession one can conclude that (contrary to some Member States like Greece) the rise in debt in Hungary was effectively the result of an increased nominal debt stock. However, the GDP grew by 5%, the deflator rose by 5.5%, which decreased the nominal GDP (at current prices) by the same amount.

An EU-wide comparison of social measures is analysed in a separate chapter. The core argument is that employees must keep their jobs, while the state should also promote a more effective operation of market forces. In some member states this argument is conducted between social partners (like in the Czech Republic), which is the sign of an effective and progressive dialogue. The social partners in Hungary demanded a state-supported short working time scheme like the German ‘Kurzarbeit’ model in order to secure jobs. They also called for industry-specific measures in the sectors hard-hit by the pandemic, but their opinion was weightless in the decisions of the government. In the lack of appropriate state support, social partners also pushed for raising the duration of unemployment support in the country (currently only three months), but this was also unsuccessful.

During the research we paid special attention to the competitiveness of the Hungarian economy. In regional comparison Hungary was successful in all factors through which the competitive advantage could be enhanced. Still, the real development of the economy was by far not outstanding due to an inadequate innovation capacity, weak digitalisation and to the large productivity gap between foreign-owned and local firms. The study examines the present and future of Hungarian digitalisation in a separate chapter. Digital solutions must play a crucial role in higher education and vocational training, both as assets and knowledge to be taught. We are in the eleventh hour to begin digital training for all generations, and building a digital ecosystem, as it is also advocated by the EU.

Owing to the lack of competitiveness, Hungarian firms depend on foreign supplies ­­– this is the issue analysed in another chapter. The research points out dependence on Russia, Poland and the Netherlands, which has not been emphasised much by other studies in the literature. The main risks are supply-side effects which require much more diversification. This would be the preferred focus rather than striving for self-sufficiency and isolation.

The next chapter reviews the pre-crisis status of Hungarian firms, and it concludes that in 2019 companies were generally quite resilient. Even the hardest-hit tourism sector was relatively in a good position when the economy was in lockdown. Owing to state subsidies for the companies in need, corporate bankruptcies were moderate compared to the Czech Republic, where they doubled in 2020. Corporate indebtedness in 2019 was even more favourable in Hungary: the data show lowering liabilities in 2020.

The last chapter in the study reviews actions concerning climate change which is the most challenging problem on the medium term. Regardless of the pandemic, the aims of the European Union are quite ambitious and funds allocated for the restart of the economies are partially linked to the fulfilment of these goals. The main goal is the reduction of greenhouse gas emissions by 55% until 2030. Member states are urged to curtail their emission faster in sectors fully or partially covered by the emission-trade system. The Commission would also introduce stricter objectives for the ratio of renewable energy sources in the energy mix. The main tool for this is the reform of energy tax which means – from 2026 – the introduction of a carbon customs fee. Not all objectives of carbon neutralisation are supported by the member states, particularly in the new EU countries, because their economy heavily relies on the targeted sectors (like the car industry).

Client:
The Fiscal Council of the Hungarian Parliament. Contract No. KVT/8-1/2021.
Duration:
August 2021
Project leader:
Péter Vakhal
Participants:
Rozália Bogó, Krisztián Koppány, Nóra Krokovay, Zoltán Matheika, Katalin Nagy, Éva Palócz, Vakhal Péter
Dokuments:

Overview of the macro economy and public finances in the first half of 2021 (in Hungarian)

The first chapter of the study offers an overview and an outlook on the global economic environment, which in 2021, too, will have at least as great an impact on the Hungarian economy, if not greater, as earlier, given the circumstances of a post-crisis restoration. Economic stimulus measures were launched at around the same time all over the world, and this gave global trade a significant boost, giving the world a chance to return to the trends that suffered a break in 2019.   After suffering a fall last year, the volume of trading in goods lifted considerably in 2021, especially in emerging countries, which includes China as well.  In the past months, however, a slowdown of trades was experienced, which is likely to be owing to the bottlenecks in logistics and the oversupply in certain raw materials and parts.

The second chapter lays out possible factors influencing the Hungarian economy and the components of GDP production and use, and the most probable trajectories of these components.  One of the lessons of the past few quarters is that the Hungarian economy has proven to be more resilient against hte second and third waves of the pandemic than previously expected. In the first two quarters of this year, the seasonally and working-day adjusted GDP volume continued to rise in comparison with the previous quarter, and at a good pace, too. On the production side, services were the only branch of the national economy where turnover volume was down compared with pre-crisis levels.

The third chapter looks at fiscal and monetary processes. It provides a detailed assessment of the 2021 budget, on the shaping of items on both the expenses and income side. It presents changes in the Hungarian public finance deficit and government debt in comparison with other European Union countries. It examines the size of Hungarian government debt, its ratio to GDP and changes in its components, especially with a view to the effects of the crisis on the budget. It establishes that the Hungarian government continues to conduct a pro-cyclical fiscal policy, targeting a high public debt-to-GDP ratio, despite fast economic growth. Notably, the frequently changing deficit targets and the government’s authoritative and unbridled spending decisions, which are lacking (parliamentary) control, make it difficult to analyse and make projections for fiscal processes.   

Finally the study analyses the main characteristics of monetary policy and the shaping of exchange rates and government bond yields, also in a regional comparison. The inflationary outlook gives cause for concern, as it is fuelled not only by a spike in domestic demand, but also by rising global raw material prices and inflation imported from abroad, which is strengthened further by the spurring effect on demand of an expansive fiscal policy.

Client:
Fiscal Council of the Hungarian Parliament, Contract No. KVT/6/2021
Duration:
August 2021
Project leader:
Éva Palócz
Participants:
Rozália Bogó, Zoltán Matheika, Miklós Losoncz, Katalin Nagy, Éva Palócz, Péter Vakhal
Dokuments:

Overview of the macro economy and public finances in 2020 (in Hungarian)

The study consists of three parts. The first chapter provides a brief overview of the international environment of the Hungarian economy, showing the consequences of the pandemic for the international economy, global trade, commodity markets and the economies of key regions in 2020.

The second chapter analyses the macroeconomic developments in Hungary in 2020, addressing in particular the effects of the economic crisis caused by the epidemic on certain components of the production and expenditure side of GDP. It presents labor market developments, taking into account the structural shifts behind the headline numbers. It also evaluates the main Hungarian economic indicators (changes in GDP, industrial production, real household earnings and consumption, investment, foreign trade, unemployment) in comparison with the correspondent trends in the EU. It forecasts not only individual components of GDP, but also, presented in a fan chart, the expected economic performance of each quarter of 2021.

The third chapter analyses fiscal and monetary developments. It provides a detailed assessment of the budgetary developments in 2020, the evolution of the major items on the expenditure and revenue side. It also presents the development of the Hungarian budget deficit and public debt in comparison with other countries of the European Union. It examines changes in the size, GDP ratio and composition of Hungarian public debt, with particular reference to the budgetary implications of the crisis. It analyzes the main features of monetary policy, the development of the exchange rate and government securities market yields, also in a regional comparison.

This chapter provides an analysis of inflation trends (also in an EU comparison) and an outline of the expected evolution of the consumer price index. The study emphasizes that although the consolidation of the economies shattered by the epidemic has begun, the return to pre-2020 dynamics will be slow both in Hungary and on an international scale. The uncertainty surrounding the epidemic will keep hampering full recovery. On the other hand, fiscal stimulus supports economic growth, at least in the short/medium run.

Client:
Fiscal Council at the Hungarian Parliament. No of contract KVT/6-1/2021
Duration:
April 2021
Project leader:
Éva Palócz
Participants:
Rozália Bogó, Zoltán Matheika, Miklós Losoncz, Katalin Nagy, Péter Vakhal
Dokuments:

Februárban megugrott az ipari termelés

Az előzetes adatok szerint 2021 februárjában az ipari termelés volumene váratlanul 1,9%-os (a munkanappal kiigazított adatok alapján 3,9%-os) növekedésbe fordult a januári közel 7%-os visszaesés után. Az előző hónaphoz viszonyítva a szezonálisan és munkanappal kiigazított termelési volumen 4,8%-kal emelkedett, és ezzel a havi volumen túlszárnyalta a Covid-válságot megelőző csúcspontot is.

Ez a felpattanás meglepő: mintha az ipar teljesen függetlenítette magát a globális logisztikai nehézségektől és a chiphiánytól. Úgy tűnik, jelenleg az ipart ellentétes irányba húzza a viszonylag kedvező keresletalakulás, illetőleg a kínálatoldali szűk keresztmetszetek.

Az első két hónap átlagában az ipari termelés 2,3%-kal volt alacsonyabb, mint az előző év azonos időszakában.

Mivel az ipart továbbra is béklyózzák a szállítási fennakadások – erre utal az áprilisi beszerzési menedzserindex alakulása is – a kiugró februári adatot a továbbiakban korrekció követheti. Ezzel együtt az idén dinamikus ipari növekedést várunk.

The Restart of European Economy and Its Impact on Central and Eastern Europe

The COVID-19 pandemic health crisis has had severe consequences on European economic activity since March 2020. The aim of the study is to assess how the recovery from the economic crisis in the European Union due to the COVID-19 will affect  the CEE countries and what will be its impact on the CEE-Chinese economic relations. 

The study was conducted in cooperation of three institutes: Kopint-Tárki Economic Research Institute as the leader of the consortium, the Institute of World Economy, Centre for Economic and Regional Studies (IWE-CERS) and the Institute of East European, Russian, and Central Asian Studies (IEERCAS, Chinese Academy of Social Sciences, Beijing). 

The study consists of 2 main chapters, within this, 7 subchapters.  

The first main chapter provides an overview  

  • on the global economic situation and outlooks of the European Union,  
  • on the fiscal processes, trends in government debts in the EU as well as its consequences in the near future 
  • on the intensity of intra-European trade relations, which is a major factor of the interdependency between Eastern and Western Europe.  

The second main chapter deals with some major specific issues of recovery and restart in Europe 

  • potential changes in the global value chains (GVC)   

European economic recovery policy focuses on future investment in the green economy and digitalization in the framework of Next Generation EU program.  

  • the growing role of investments in digital capacities and capabilities in the recovery of European economy, also in CEE.  
  • the attitudes of CEE countries towards green economy, investment in renewable energy sources and/or nuclear energy. 

The last subchapter addresses the possible impact of the pandemic on economic and trade relations between China and CEE.

Client:
China CEE Institute, Budapest
Duration:
September 2020
Project leader:
Éva Palócz
Participants:
Rozália Bogó, Miklós Losoncz, Zoltán Matheika, Katalin Nagy, Péter Vakhal (Kopint-Tárki), Andrea Éltető, Gábor Tury (KRTK-KTI) és He Ting (IREECAS, Peking)
Dokuments:

Macroeconomic and public finance situation in 2019 and the first half of 2020 (in Hungarian)

The study comprises two parts – the first, written in April 2020, gave an overview of economic developments in 2019 while the second part, written in September 2020, analyzed the turbulent economic changes in the first half of 2020. 

The structure of the two parts is similar. The first chapters provide a brief overview of the international environment of the Hungarian economy. The second chapter analyzes the macroeconomic developments in Hungary (in 2019 and the first half of 2020, respectively), with separate analyses of the first quarter – that was only slightly affected by the COVID crisis – and the second quarter, the period during which the economy suffered a sudden shock due to the pandemic. An analysis of the changes of individual components of GDP – and the connections between those changes – is provided on both the production and expenditure side. The chapter also discusses changes in the balance of payments and labor market developments. The third chapter in both parts gives an overview of fiscal and monetary developments, with a special focus on the impact of the crisis on the fiscal situation in general and on the most important revenue and expenditure items in particular. 

While writing the first part of the study, at the end of April 2020, we had to give an economic forecast for the year when everything was in flux, and the impact of the crisis was very hard to assess. Despite the high level of uncertainty, the April forecast of Kopint-Tárki proved almost spot-on: it predicted a GDP fall of 5.5 percent for 2020, with the assumption that the epidemic would taper off by the end of summer, and economic decline substantially softens by the last quarter of the year. That assumption was too optimistic: instead of waning, the pandemic returned with a vengeance in autumn. 

As a result, we slightly revised our GDP forecast in the second part of the study in September 2020, from -5.5 to -5.8 percent. We also revised the prediction regarding the 2020 fiscal deficit upward, to 8.9 percent of GDP. 

International economic trends in deteriorating global environment – consequences for Hungary

The aim of the project was to explore how the COVID-19 pandemic affected world economy. The COVID-19 pandemic health crisis has had severe consequences on global economic activity since March this year and has overwritten all previous forecasts. The crisis – due to the lockdown and diminishing consumer confidence – lead all over to a substantial drop in the demand of private consumption and services. At the same time in certain areas – like the health sector, food products, household goods – demand grew suddenly in a way where supply could not keep pace with. During the pandemic inflation remained in general moderate, reflecting the extremely low level of oil prices, and dramatically shrinking demand. However, the trends show great varieties depending on sectors and regions. The global crisis has had severe consequences on labour markets. In case of several countries short time work schemes were introduced. The crisis affected in the first line low-skilled labour and female employees and led to jump unemployment rates in sectors where the possibility of home office was not a viable alternative and where market demand shrunk dramatically. Freelancers especially in the field of cultural services, self-employed, part-time workers, or employees on fixed terms, vulnerable groups of young workers had to face severe problems.  

The experiences during COVID-19 crisis drew attention to an old debate concerning benefits of GVCs contra national production. A rethinking of the stability of value chains will be necessary, an improved transparency and a better for-warning system might make value chains more robust in case of similar shocks in the future. A post-crisis adjustment can generate structural adjustments (e.g. the green economy) which again would produce new types of value chains. If preference will be given to reliability and security against cost efficiency a new approach of acquisition may evolve, supplier chains could become shorter and an increased diversification of supply sources could be strived for. There was a sharp drop of world trade early 2020, especially exports of advanced countries shrunk dramatically. With reshaping value chains, a relocation of production in certain sectors could be observed both in Europe and the US, however, due to capacity constraints this remains rather the exception. Anyway, the role of China as a global player will change in the future: its role as a supplier will weaken, however it will play a growing role as an international investor. 

Responding to the unfavourable impacts of the pandemic monetary easing continued. Efforts for crisis management and economic stimuli programmes introduced lead in all countries (not only in Europe) to a substantial rise of public debt. 

Client:
Prepared for the Secretariat of the Fiscal Council
Duration:
September 2020
Project leader:
Katalin Nagy
Participants:
Rozália Bogóné Jehoda, Miklós Losoncz, Éva Palócz, Péter Vakhal, Csaba Tóth G.

Evaluation of the implementation of the Hungarian National Social Inclusion Strategy (HNSIS)

The aim of the evaluation was to explore how and to what extent the developments supported by the Operational Programmes of the 2014-2020 period contributed to the implementation of the Hungarian National Social Inclusion Strategy (hereafter HNSIS or Strategy), to the improvement of living conditions and social positions of disadvantaged target groups, and to a better access to quality services. The aim of the evaluation was to formulate further input and recommendations for the post-2020 period.  

The evaluation considered the successful implementation of the Strategy both in horizontal and sectoral areas. The horizontal topics were improvement in access to public services and the situation of Roma women, while the following seven sectoral areas were examined: (i) child welfare and child protection services, (ii) educational performance, school segregation, (iii) employment, employability, (iv) health care, (v) housing, (vi) reducing regional disparities, and (vii) cultural dialogue, awareness-raising, antidiscrimination.  

We assessed altogether 104 calls of five operational programmes – HROP (Human Resources Operational Programme), TSDOP (Territorial and Settlement Development Operational Programme), CCHOP (Competitive Central Hungary Operational Programme), EDIOP (Economic Development and Innovation Operational Programme), SSDPOP (Supporting Socially Disadvantaged Persons Operational Programme) – in the scope of this evaluation, 25 of them in detail. On the end date of the period under scrutiny – 21 August 2019 – only a fraction of the (altogether 5,386) projects linked to the 104 calls were completed (14%) while 40% of them had not even started.  

Based on our sample of 5,386 projects, financial progress was relatively slow-paced, considering that we were coming close to the end of the programming period, although all in all this is not something that posed an obstacle to the implementation of winning projects, as projects usually received more than half of the contracted support in the form of an early payment (as of 21 August 2019). In addition to European Union funds, policy changes and the favourable economic upturn of the past few years, as well as the increasing labour shortage, all had a significant impact on the implementation of the HNSIS and on the achieved results. 

Manufacturing sentiment indicator

Kopint-Tárki’s economic confidence survey, the Manufacturing Survey Results (Konjunktúrateszt in Hungarian) is conducted four times a year among manufacturing companies active in Hungary. The sample includes small, medium and large companies. The report contains findings on company perceptions on current economic situation and forthcoming developments, trends in production, inventories, domestic and export sales, capacity utilisation and employment. An analysis of empirical findings is included along dimensions of sector, size, main activity and ownership.

Some key factors of catching up of the Hungarian economy

The analysis deals with the issue of labour force as a key factor in the problems of the Hungarian economy, more precisely with the labour shortage and its components. Labour shortages are only a superficial manifestation of the Hungarian economic problems, which are closely related to almost all neuralgic issues of the economy. The study examines these issues. 

  • The productivity lag of the Hungarian economy can mainly be explained by the low productivity of domestically owned SMEs. In addition to lower technological level, the decisive factor is that lower wage levels make it more difficult for them to access a highly skilled workforce and themselves spend less on training the workforce, too. 
  • Tax rates on wages are high in international comparison, despite tax cuts in recent years. Further reductions in taxes on wages are a key issue for improving productivity, as they also contribute to reducing emigration of skilled labour force. 
  • According to the European level data of the European Innovation Scoreboard (EIS) and the CIS (Community Innovation Survey), the innovation activity of Hungarian companies is rather low, here too SMEs are at a significant disadvantage. This is closely related to the lack of an innovative workforce. 
  • Providing a highly skilled and flexible workforce is the responsibility of the education system. Both the results of the PISA surveys and the high school drop-out rate, as well as the frequent reorganization of the vocational training system, show the low efficiency of the education system 
  • Quality of public institutional environment is crucial for corporate innovation. Hungary is not doing well in the so-called governance indicators. Over the past two decades, Hungary has experienced a marked deterioration in almost all government efficiency indicators. 
Client:
VOSZ (Vállalkozók és Munkáltatók Országos Szövetsége)
Duration:
January 2020
Project leader:
Éva Palócz
Participants:
Zoltán Matheika, Péter Vakhal, Tamás Gebei
Dokuments:

Study on factors influencing Hungarian companies’ innovation activities

Hungary’s position in various innovation rankings of the EU (European Innovation Score-board, Community Innovation Survey, InvestmentSurvey of the European Investment Bank) roughly corresponds to itslevel of development: out of the 28 EU Member States, Hungaryoccupies the 4th-7th place from behind.The survey conducted in the framework of our research demonstrated that

• 80 percent of firms surveyed conducted smaller or larger innovations in the past three years or at present. That is a much higher rate than that in the CIS survey. One explanation of this difference might be that more attention was given to the concept of innovation in our survey which raised respondents’ awareness.

• 60 percent of product or serviceinnovation was virtually completely the same as products already on the market, while only 5 percent was completely new. Thus, only a small portion of companies conduct innovation to overcome competitors, most innovation are of a ‘follower’ type.

• Only about 10 percent of respondents introduced any changes in their production processor/and marketingactivity, and almost one-third of the respondent companies implemented organisational innovation.

• Aslightly different picture emerges in the light of the question of how companies perceive theneed for innovation. Small entrepreneurs (less than 19 employees) tend to believe that the market is not interested in any innovation, while larger firms are convinced that to stay on the current market, innovation is definitely required.

• Not surprisingly, respondents identified skilled labour shortages as by far the biggest barrier to innovation (82%). This is followed by market uncertainty (50%) and problems of funding (44%).

The survey was supplemented byinterviews with corporate managers. The interviews largely supported the results of the survey and provided a wealth of additional information.Based on the survey results and the conclusion form the interviews, the top threebarriers to innovation in Hungary could be identified (not in hierarchical order):

• Most companies which are not innovative have the belief that innovation is not needed at all. This comes from management reluctance, lack of knowledge and from the lack of a long-term strategic approach. Although the macroeconomic environment of innovation cannot be ignored, the innovation capacity of companies is highly dependent on the professional skills and approach of the firm managers.

• Lack of relevant skills: although labour shortage is a severe factor in Hungary, which innovation should in theory alleviate, proper knowledge on this subject is often missing. This is rooted in the anomalies of the education and training systems. A weak competitiveness is also a relevant factor, as it contributes to brain drain, while the economy struggles to attract modern expertise. A large part of the growth relies on cheap labour, regional disparities are high, particularly in productivity.

• Unpredictability of public innovation management and support institutions: The public institutionsaiming at support of conducting firm innovation (and/or R&D) have frequently changed in recent decade. Not only the name and organisation of these public institutions have changed, but also the concept has often gone through significant changes.

Client:
Az Európai Bizottság magyarországi képviselete N° NP/2019-17/BUD
Duration:
February 2020
Project leader:
Éva Palócz
Participants:
Zoltán Matheika, Péter Vakhal, Tamás Gebei
Dokuments:

Preparation of impact evaluation of EFOP 3.1.5-16 – The support of institutions endangered by early school leaving

  • The objective of this preparatory methodological report is the comparison of schools involved in the EFOP-3.1.5-16 (The support of institutions endangered by early school leaving) project with those having similar characteristics but being excluded from the project, with the aim of pointing out the achieved effects in an ex post evaluation to be conducted later. The basic objective of the EFOP-3.1.5-16 project was to implement complex and targeted institution developing programs in selected public educational institutions having pupils without qualifications and imperilled by early school leaving and in those with segregated education and training and underperforming in the national competence measurement surveys. These programs were meant to reduce the risk of early school leaving and to render pupils help to obtain qualifications and competences essential and applicable in the labour market. 
  • 457 institutions (task performing places) participated in the program, from which (after discussions with governmental specialists) we focused on 300 institutions (schools) (the other 157 participants were pre-school institutions). Out of this, 154 entities were included in the program based on the segregation index and illegal separation. 102 institutions were endangered by early school leaving and the remaining 44 task performing places were partner institutions supporting institution development processes. In the EFOP-3.1.5-16-00001 program all the three target groups accomplish a complex institution development process run as pilot projects in the Supporting Pedagogical Framework System. For the evaluation, a control group should be defined (counterfactual impact analysis) together with the necessary base data. Regarding the latter, the availability of data should be ensured for both the surveyed and the control group. The impact analysis will be part in the evaluation of the thematic objective of “School leave without qualification”, planned in 2020. 

Budgetary position in the light of the world economic conditions (in Hungarian)

The study provides an overview of the medium-term processes of the world economy and their impact on the Hungarian economy (growth) and public finances.

The study consists of four chapters. The first chapter examines the evolution of growth conditions in the world economy in the second half of 2010, in particular:

  • factors contributing to the medium-term slowdown
  • the emergence of new types of risks over the past five years: trade policy tensions, the Brexit process, the unpredictability of US foreign relations
  • current trends in the international financial environment and the macroeconomic effects of expected changes: the consequences of tightening monetary policy, risk aversion among investors, capital outflows from emerging markets, stock market risks
  • growth prospects and risks by major region.

The second chapter analyzes the structure and dynamics of Hungarian foreign trade:

  • the regional structure and geographical concentration of Hungarian exports, with special regard to the growth poles
  • the regional structure and geographical concentration of Hungarian imports
  • adaptation of Hungarian exports to world economic restructuring.

The third chapter examines the commodity structure of Hungarian exports and imports and its changes in various foreign trade relations.

The fourth chapter presents the fiscal and financial aspects of world economic and trade processes:

  • general government balance and government debt
  • the effect of changes in exchange rates on the real income of the national economy.

Impact of net exports on the balance of payments and changes in net external liabilities between 2010 and 2017.

Client:
Fiscal Council at the Hungarian Parliament, based on the research agreement KVT/51-1/2018
Duration:
2018
Project leader:
Katalin Nagy
Participants:
Ágnes Nagy, Éva Palócz, Péter Vakhal
Dokuments:

No. 73, Katalin Nagy, Nóra Serfőző (2017): Differences of economic development and ways of cooperation in the Slovak-Hungarian cross border region

The article gives an overview of economic processes in the Slovak-Hungarian border region. The main conclusions are based on the principal findings of a Slovak-Hungarian cross border migration project funded by the Hungary-Slovakia Cross Border Cooperation Programme 2007-2013. According to the authors, economic and welfare differences between the two sides (Western and Eastern parts) of the Slovak-Hungarian border have remained substantial in the post-crisis period. This applies to both the Slovak and the Hungarian border regions. Whilst in the Eastern part, Slovak NUTS III regions are more advanced compared to Hungarian counties, in the Western half of the border, the picture is more differentiated. Losses due to the global crisis could be totally offset in the Western border region; this was only partially the true for the Eastern part of the border. The authors study the period from 2008 to 2013 and give a comprehensive analysis on regional differences based on macroeconomic and enterprise data and try to find an explanation for the persistent differences and for the slow progress of economic cooperation.

Client:
Journal of Economic Literature (JEL) code: E01, E66.
Duration:
2017
Project leader:
Katalin Nagy, Nóra Serfőző
Dokuments:

Wage level and wage dynamics in the chemical industries (in Hungarian)

The aim of the analysis is to examine the wage and employment trends in the chemical-related sectors between 2014 and 17, and to assess what trends are to be expected in the coming years, especially in 2018. It compares labor market trends in the chemical industry with averages for the enterprise sector and manufacturing, to assess how much the chemical industry wage trends are in line with changes at the national level. It analyzes wage developments from two sides: on the basis of macro-level data provided by the CSO’s wage statistics and on the basis of micro-level data presented in the Wage Tariff of the National Employment Service, officially called the “Statistics of individual wages and salaries”.

The study examines the impact of mandatory minimum wage increases on overall wage increases in the selected sectors in 2017. It endeavors to answer the question of how many employees would have seen their wages raised if only the mandatory minimum wage increases had been implemented in 2017 and the wages unaffected by the minimum wage hike had been left unchanged. It presents calculations regarding the partial effect of the increase in the minimum wage and the guaranteed wage minimum on wage costs and the expected wage structure in 2017 in the chemical sectors.

Client:
Trade Union of Chemical and Energy Industry Workers and related Industries
Duration:
2017
Project leader:
Éva Palócz, Zoltán Matheika
Dokuments:

No. 72, Antónia Hüttl, Ágnes Nagy (2016): Organisational capital and hospital performance in Hungary

The paper presents a case study exploring the possibilities to measure own-account organisational capital and its impact on hospital performance in Hungary. The comparable dataset consists of the time series 20102013 of 58 general hospitals owned by the government. Investment in own-account OC is measured both in a narrow and in a broad sense, depending on the range of employees contributing to OC. In the period according to our estimates, applying the narrow concept the average stocks of OC varied between 2,5-4,3% of the wages of all employees, and between 11,3-12,3% in the broad concept. The analysis has provided some evidence that the stocks of OC in broad sense has a slight positive effect on clinical performance, measured by the cost weighted number of activities. Applying OC in the narrow sense, a positive correlation could be detected only if higher values have been attached to DRGs of complicated interventions and of treatment of serious diseases.

Client:
This paper was prepared in the FP7 Seventh Framework Programme of the European Union, SPINTAN project WP5 Austerity and recovery, Grant agreement number: 612774
Duration:
2016
Project leader:
Antónia Hüttl, Ágnes Nagy
Dokuments:

Overview of the mid-term processes of the world economy on the Hungarian economy (growth) and its impact on public finances

The study was prepared for the Secretariat of the Fiscal Council of the Hungarian National Assembly by the Kopint-Tárki team to review the impact of global economic processes on the Hungarian economy. The paper analyzes the growth processes in the world economy, focusing on the second half of the 2010s, and the regional characteristics of the Hungarian foreign trade relations over the 2012-2016 period. It also examined the commodity structure of the Hungarian import and export between 2012-2016 as well as the impact of foreign trade performance on the growth of the Hungarian economy, the net external financial liabilities and the budget situation.

No. 71, Éva Palócz, Zoltán Matheika, Péter Vakhal (2016): Structural changes in public expenditures in the European Union since 2008 – with special regard to new member states

This paper analyses the reasons for growing size and the change in the structure of public expenditures in the European Union since 2007, with special regard to the New Member States (NMS). In the first part, by using the decomposition technic, the increase of expenditure ratio-to-GDP will be separated to 1) the impact of the change in GDP and 2) the effect of the change of actual public expenditures. The calculation shows that in 2009, mainly the fall of GDP was responsible for the rise in the expenditure ratio. This means that the „automatic stabilizer” was more important in shaping the fiscal trends in the year of the acute crisis than the demand-boosting actions. Taken, however, the entire period since 2008, the higher expenditure ratio in 2014 can exclusively explained by the expenditure effect. Beyond the average, there is a great variety both in the old and in the new member states. Concerning the structure of raising expenditure ratio, the paper uses the COFOG statistics measured by the share in GDP. The main characteristic of the changes can be summarized by the growing share of expenditures on social protection and health since 2008, in the EU28 average. In NMS, however, the share of expenditures on social protection decreased since the global crisis.

Client:
FP7 Seventh Framework Programme of the European Union, SPINTAN project WP5 Austerity and recovery, Grant agreement number: 612774
Duration:
2016
Project leader:
Éva Palócz
Participants:
Zoltán Matheika, Péter Vakhal
Dokuments:

Overview of the Hungarian employment situation at the beginning of 2017

The study analyses the employment situation in Hungary, based on corporate surveys and the data of the Labour Center from the beginning of 2017. The study focuses on the development of vacant posts and tax wedges, also emphasizing the composition of jobseekers and employees. It reviews and evaluates the public work system , its main rules and its employment policy function, and analyzes collisions between companies and local governments, making proposals to resolve conflicts of interest. The study also provides a comprehensive picture of the current situation of education and vocational training and provides an estimate of the cost of temporary and permanent accommodations related to the county-level extra labour demand.

The study is available in Hungarian.

Client:
National Association of Entrepreneurs and Employers (VOSZ)
Duration:
2017
Project leader:
Zoltán Matheika, Éva Palócz
Dokuments:

No. 70, Zoltán Ádám (2016): The fight against unemployment – the case of Hungary

The paper discusses labor market developments and related policies in Hungary since the early 1990s, and was prepared in context of the project “Hidden Triggers of Economic Growth in V4 plus Ukraine” supported by the International Visegrad Fund. Hungary has been a special case of post-socialist transition in Central and Eastern Europe with respect to labor market developments. First, Hungary inherited a relatively lax public finance system from state socialism in which episodes of fiscal populism were rather the rule than exceptions. In this tradition, fiscal concessions are made on a recurring basis so that pacifying social conflicts. Applying this approach, the number of working age pensioners rose by about 200 thousand, whereas the number of working age inactive persons did by about 800 thousand in the 1990s. As a result, Hungary became characterized by comparatively low levels of both employment and activity, whereas unemployment also remained comparatively low. This placed a large burden on public finances that became unsustainable by the mid- 2000s. The subsequent fiscal stabilization created severe social strain and political tensions. In reaction, both left and right wing governments in the following years implemented a wide range of public employment schemes that became the major anti-unemployment policy tool of the 2010s. Hence, unemployment gradually decreased, but close to half of the newly created jobs in the early 2010s were created through public employment. This, again, entails large fiscal expenditures and result in a rather questionable policy outcome as those involved in public employment do not experience an improvement of their labor market relevant skills and often find themselves locked in public work.

Duration:
2016
Project leader:
Zoltán Ádám

The tendencies of trade in value-added in the OECD countries

The structure of the study is as follows: in the first chapter we present the main trends in world trade, the impact of free trade agreements and the relationship between trade and FDI. In the second chapter, we define trade in value-added as well as the difference between traditional trade statistics and trade in value-added and we show its importance by using a common example. Then we will focus on the relation of trade in value-added with competitiveness and with global value chains.In the third chapter, we present the methodology for compiling the TiVA and explain the indicators and concepts of statistics such as domestic added value, import added value, and so on.
In the fourth chapter, we evaluate the preliminary results for the European Union, for Hungary and the rest of the world.

No. 69, Katalin Nagy (2005): Thoughts on Hungarian industrial policy–adaptation and pathfinding

The Hungarian industrial policy of the future should be a competition and development oriented policy encompassing not only the industry itself, but also numerous segments of the economy. Conceptually, it is much more a horizontal policy – operating with sector-neutral instruments – than a type of sector policy. Thus, in our approach, industrial policy comprises business policy, innovation and technology policy, as well as competition policy. Today’s industrial policy must face two challenges:

  • it should contribute to the improvement of competitiveness of the Hungarian industry, with considering issues like easing pressures on the environment, or social and employment related – consequences of structural transformation
  • it should promote a rapid integration within the internal market of the European Union Industrial policy goals, such as improvements in competitiveness, modernization of the production structure, support for SMEs (small and medium enterprises) as well as for environmental issues, have become harmonized with those of the European Union. In the course of implementation instruments that conform to EU standards are to be used with aiming at improving cooperation between the domestic SMEs and the multinational corporations, enabling corporate networks, increasing the capacity for corporate innovation, encouraging investments.

In line with the Lisbon goals the EU’s new industrial policy has become more innovation-oriented, providing guidelines for establishing necessary frameworks encouraging entrepreneurs. As a result of the accession:

  • Hungary has become a part of the internal market, thus accommodation becomes inevitable
  • Hungary’s state aid system has already been adjusted to fit the goals and the competition policy rules of the EU. As in the development policy of the future the importance of structural funds and the necessary Hungarian co-financing will grow (especially after 2007), we might assume that the guiding role of the EU objectives will strengthen
  • due to export-orientation and the preponderance of foreign capital in the locomotive sectors of Hungarian industry, our integration in international production networks in the future will continue to be realized through the mediation of FDI. In the areas where foreign companies dominate already, the direct influence of economic policy is very limited. However, the improvement of the general framework of investments and entrepreneurial activity in Hungary could make this market more attractive to foreign companies, or keep domestic companies at home, enabling their integration. Many studies have also proven that, within certain sectors, as well as within certain corporate groups, differences are becoming greater than between sectors or corporate groups. Thus, the goal of state institutions desiring to enable industrial development should be instead of pursuing a sectoral approach, the strengthening of broadly-defined competitiveness capabilities, entrepreneurial skills, access to knowledge and capital, workforce training and mobility-increasing tools. The latter permitting cheap access (as soon as possible, perhaps free of charge) of needed information to businesses.
Client:
Ministry of Economics and Transportation
Duration:
2005
Project leader:
Katalin Nagy
Dokuments:

Survey and study paper on the Hungarian investment environment

The aim of this study is to investigate the reasons for weak investment activity of the Hungarian corporate sector in the last decade, with special regard to the recent years. Chapter 1 gives a general overview of the Hungarian investment performance since 2005 compared to the neighbouring countries, broken down by sectors, asset types and industries. Chapter 2 focuses on the investment activity of the corporate sector by using microeconomic data that provide the possibility to have a more detailed picture about the share of firms of different size and of different ownership. Chapter 3 tries to identify the relation between national competitiveness indices and private investment performance by using the institutional indicators of the World Economic Forum. Chapter 4 evaluates the results of the survey that was conducted in the framework of this work among 400 firms representing all industries in Hungary. Respondent companies identified the main bottlenecks to investment incentives in four fields: institutional barriers, access to labour, access to capital and knowledge and technology. Chapter 5 processes the result of deep interviews made with 40 managers from different industries along the same structure of thematic blocks that were surveyed by the questionnaires.

The study was prepared for the European Commission Representation in Hungary (No.  22/2016, Tender No.: 18/07/29016).

Client:
European Commission Representation in Hungary (No. 22/2016, Tender No.: 18/07/29016)
Duration:
2016
Project leader:
Éva Palócz
Participants:
Éva Palócz, Zoltán Matheika, Ágnes Nagy, Katalin Nagy, Gábor Oblath, Péter Vakhal
Dokuments:

No. 68, Éva Palócz (2005): Business services in Hungary

Economic thought has come a long way regarding theories on services. This journey was long not in terms of time, but rather, in terms of the merits earned along the way. For, a couple of decades ago, services were still considered a factor that slowed the rate of economic growth. In other words, this sector was deemed to have a low productivity which could be increased only at a slow pace; it was considered a sector whose mechanization, standardization – all that increases productivity in the manufacturing industry – could only be realized to a limited extent. Service theories held that the continuous growth in the weight of services in the economy was a consequence of economic development – instead of seeing it as one of the causes, i.e., an important element of economic growth. This judgment is, on the whole, accurate when dealing with household and (state) public services. In line with the rise in incomes, households have more income to dispose of above what they spend to secure their livelihood; they then spend this remainder on different services. Growth in the public services sphere is also a consequence of economic development, since it is connected to the broadening social services of the welfare state. However, if we turn to services provided to businesses, traditional development theories have only recognized the important economic role of infrastructure services (transportation, communication) and that of financial services, primarily their capacity to lessen transaction costs. Business services, however, were far from belonging to this group: in this area, the most that theories would acknowledge was that outsourcing business services increases the efficiency of the manufacturing industry. The appearance of information technology dealt the first blow to this traditional theoretical approach, as it became obvious that the application of information technology to business services resulted in great gains in efficiency. Further, analysts were challenged by the fact that economic growth of the United States (regarded as the world’s foremost service economy) did not lag behind that of European countries (where the share of services is far lower); actually, in the long run, the economic growth of the United States overtook that of Europe. The increasingly broad scope of this industry steadily strengthened the realisation that business-related services represent the fundamental element of competitiveness in developed economies. The wide, thick network, as well as the quality of these services, is not only one of the central requirements for growth of both business productivity and efficiency, it is also the guarantee that the entire economy will function as a well-oiled machine.

Client:
Ministry of Economics and Transportation
Duration:
2005
Project leader:
Éva Palócz
Participants:
Judit Hamar, Lilla Jutkusz, Ágnes Hárs, Rozália Bogó
Dokuments:

Realignment of fiscal processes in the major countries of the world economy, in the EU and Hungary in 2016

The purpose of the study is to review the fiscal processes that have characterized the European Union’s economies over the last two years, especially the Central and Eastern European countries and Hungary. The study analyzes the change in the rate of government spending over the past two years and its components in the countries of the EU, as well as the structural changes in EU28 public spending, especially over the last two years. The study provides an analytical overview of the Stability and Convergence Programs and an international comparison of the macroeconomic role and structure of grants from EU funds.

Client:
Secretariat of the Fiscal Council of Hungary. Contract number: KVT/41-1/2016.
Duration:
2016
Project leader:
Éva Palócz
Participants:
Zoltán Matheika, Péter Vakhal, Éva Palócz
Dokuments:

No. 67, András Köves (2004): Russian economic growth and development – some new and old dilemmas

This paper aims to contribute to recent discussion, both in Russia and internationally, about Russian strategies of economic development. The debate is focused on the dangers associated with present resource-oriented (practically: oil- and gas-oriented) development, and the need for, as well as, constraints of, a change to priority development of nonresource, mainly high-tech sectors in manufacturing and services. The controversies are linked, among others, to diverse interpretations of the content and the likely economic consequences of the protracted conflict between the Russian state (the President) and the private oil industry (the “oligarchs”). The problems with Russian oil and gas industries are approached here in historical perspective. Hydrocarbons production and, especially, exports were of overwhelming importance for the Soviet and, later, the Russian economy. However, priority development of the oil sector has become a clearly discernible fact following the financial crisis of 1998 only. During most of the previous century, growth was concentrated on that of the machinery industry (within machinery, in the first instance, the military industry, as well as the branches serving it). Development of oil and gas, as well as of other mineral resources was considered a necessary evil and a constraint to economic and military development. When nowadays contrasting Russia’s resource-based and non-resource sectors, it should be born in mind that military industry is among the few sectors that could effectively (however, to a limited extent only) contribute to the country’s incomes from exports in case proceeds from oil and gas decline for any reason. As modernisation of army is now on the political agenda, defence sector is an important candidate to benefit from state-managed industrial restructuring. The tragedy in Beslan in September 2004 has strengthened the position of those in Russia who consider the terrorist assault not as the most terrible act of an internal armed conflict, but as a “war”, “diversion” supported by the West (the United States) and aiming at “undermining the Russian state” (“подрыв Российского государства”), and, for that reason, press for the multiplication of the country’s military budget (Leontyev 2004). However, as far as economy is concerned, under present circumstances there is no alternative to parallel development of resource-based and non-resource sectors of the Russian economy with a view of maintaining and widening the scope of the dynamic sectors and branches. In the foreseeable future, exports growth will obviously be based on oil and gas (and some metals) as well as military industry products. The biggest challenge for the Russian economy, however, is to increase production of up-to-date goods and services both for production and consumption uses – from food and textiles to information technology – that can compete with foreign firms on domestic and international markets. Success or failure in those fields (whether related to growth in oil and gas sectors, and/or defence, or not) will realistically indicate, how deep and progressive structural changes in the Russian economy are.

Duration:
2004
Project leader:
András Köves
Dokuments:

The situation of the Hungarian chemical industry

The study analyzes the situation of the Hungarian chemical industry, focusing on major international trends in the chemical industries in the world and in Europe. Based on statistical data, it analyzes the location of the chemical industry in the Hungarian manufacturing industry, industrial branches by subsector breakdown and the chemical industry in terms of production and sales, producer prices and foreign trade. Based on company size and ownership structure, it provides an overview of the Hungarian chemical industry, analyzing the number of companies, their employment status and capitalization, and the sales revenue and profitability of chemical companies according to size and ownership categories.

Client:
Hungarian Chemical Industry Association (MAVESZ)
Duration:
2016
Project leader:
Éva Palócz
Participants:
Zoltán Matheika, Ágnes Nagy, Éva Palócz
Dokuments:

No. 66, Zoltán Ákos Kovács (2004): Is there any convergence in trade structures following EU accession? Some trade related aspects of enlargement

The aim of this paper is to reveal some trade related aspects of recent enlargement of the EU with a reference to experience of the former acceding countries from Ireland to Finland. The main question to be raised here is whether joining the EU, in general and participating in a deeper economic integration, in particular (as being represented by the Single European Market /SM/ and Economic and Monetary Union /EMU/), may induce an assimilation of trade structures.Due to time and data constraints, recent analysis is based mainly on Eurostat (Comext) trade statistics as being available on CD-ROM for the years 1988-2002 with trade classification of CN/HS. This also means that the data used for calculation here has been compiled by Eurostat on the basis of trade figures of the 15 former EU member states as reporting countries with special attention to Ireland (date of accession: 1973), Greece (1981), Portugal and Spain (1986), as well as Austria, Finland and Sweden (1995), hereinafter called as EU7. To be comparable, exports and imports of the former EU member countries (hereafter EU15) to/from each other (i.e. intra-EU trade), as well as trade of EU15 to/from the newly joined member countries are analysed. Since these latter countries were still Candidate Countries in the period subject to recent paper, the abbreviation ’C10’ will be used throughout the text. This time disregarding trade of the new EU members with each other (i.e. intra-C10 trade) what amounted to more than 24 billion euro in 2002 and represented about 15 per cent of their total exports, intra-EU15 plus trade with C10 will constitute the basis of the enlarged Single European Market. The share of Intra-C10 trade in this new intra-EU trade is insignificant, only less than 1.5 per cent, although potentially increasing.

Duration:
2004
Project leader:
Zoltán Ákos Kovács
Dokuments:

Realignment of fiscal processes in major countries in the world economy, in the EU and Hungary in 2015

The study examines the realignment of fiscal developments as a result of the crisis in the world’s most important economies. It provides an overview of public finances before, during and after the crisis, and examines the structural changes in public spending as a result of the crisis to the present day in the EU Member States. The study also examines the overall indicator of internal structural change in expenditure, provides an overview of changes in the budgetary expenditure structure of some of the major OECD Member States and assesses public finances trends in the light of economic growth. It also analyzes the similarities and differences in the expenditure structure of public finances and gives an international comparison of the use of the Structural and Cohesion Funds between 2007 and 2013.

Client:
Secretariat of the Fiscal Council of Hungary
Duration:
2015
Project leader:
Éva Palócz
Participants:
Péter Vakhal, Nóra Serfőző, Annamária Pethő
Dokuments:

No. 65, Judit Hamar (2004): Productivity gap and restructuring – mapping the technology structure of branch plants and technology integration of CEECs

The project analyses determinants of productivity gaps between the average productivity levels of the EU-15 and a selection of most advanced Central East European Economies (such as Czech and Slovak Republic, Estonia, Hungary, Poland and Slovenia). The objective is the generation of a unique knowledge base on the various determinants of lower levels of economic development in accession countries. Determinants assessed comprise of three groups: patterns of domestic and international specialisation at the macro-level, technological sophistication of production at a mezzo level, and firm-specific determinants at the micro-level of individual enterprises field work. This newly generated body of comparative knowledge will be compiled with a view on an effective management of the accession process, and strategies.This paper summarises research results of WP4 subproject: Mapping the Technology Structure of Branch Plants and Technology Integration of CEECs. Each of the five country studies presented an overview (I. part) about economic development, changing conditions for, and results of FDI as a mechanism of productivity growth in Estonia, Poland, Slovakia, Slovenia, and in Hungary at a comparative way. The second part presents the descriptive analyses of the answers of FIEs (subsidiaries of foreign firms) on a two page structured questionnaire and first results of regression analysis to determine which factors are significant overall these subsidiaries in the five countries. We will focus on differences rather than similarities by summarising the main features of economic development and changing conditions, and of FDI-inflows by countries (I. part). The second part, based on fieldwork results, generating a large database on altogether of 458 foreign subsidiaries, will summarize the determinants of subsidiary’s autonomy, the role of parent firm in different business functionsmarket-orientation, and structural differences. We focus on the links to the magnitude of changes, what role the FDI had in productivity growth, sales-, exports-, technology, and quality improvement by structural differences in each country to understand the different results and prospects.

Duration:
2004
Project leader:
Judit Hamar
Dokuments:

Complex impact assessment of the trade and investment agreement between the US and the EU on the Hungarian economy

The study analyses the Transatlantic Trade and Investment Partnership (TTIP) and its impact on the Hungarian economy. It gives an overview of the planned TTIP, the negotiation process, the main objectives and the trade between the US and EU. The study also examines the Hungarian-American economic relations, foreign trade, the export and import market structure and the US role in Hungarian equity investments. Effective customs duties are also accounted in the Hungarian-American foreign trade, and the expected impact of TTIP on the Hungarian foreign trade flows.

Client:
National Council for Sustainable Development of the Hungarian National Assembly. Contract number: NFFT/25-1/2015
Duration:
2015
Project leader:
Éva Palócz
Participants:
Ágnes Nagy, Zoltán Tarnai, Péter Vakhal
Dokuments:

No. 64, András Köves (2004): Perspectives for economic cooperation between Russia and the countries of Central and Eastern Europe in the light of the enlargement of the European Union

This paper argues that Eastern enlargement of the European Union, which is to be accomplished de jure as of May 1, 2004, will not bring about any further significant changes in trade and economic cooperation between Russia and the former socialist countries of Central and Eastern Europe (CEE). Most of the really important changes related to the European integration and re-orientation have already occurred in the period following 1989, and there is little left for the future. On the other hand, economic and political stabilization in the CEEs – of which full membership in the EU should be an important phase – may contribute to better conditions (than in the turbulent transition period) for the development of relations with Russia (and other CIS countries outside the scope of the paper) as well. De facto integration of CEEs in (Western) Europe started as early as 1989-1990, concurrently to political change and economic transformation. Of all fields of integration, trade was the first to start. Trade re-orientation was an organic part of transformation (as a consequence of both the collapse of the CMEA and the rapid rise of trade with the West), and was an accomplished fact in most of the CEEs as soon as early 90s. By the end of the millennium, the share of the 15 present member countries of the European Union in total trade of most of the CEEs reached the point of culmination. This is a unique feature of Eastern enlargement (as compared to previous cases of enlargement): trade-creating and trade-diverting effects of joining the European Union had emerged in their entirety before full membership of the newcomers was attained. It would make no sense (what is more, it would be even counterproductive) to aim at further increase of those shares.Parallel to the growing volumes of trade, and in accordance with the „Europe Agreements” concluded in early 90s, trading systems and trade policies of now acceding countries have gradually approached those of the Union. Therefore, coming change from national trading systems, regulations and policies of the CEEs, and also from nationally concluded trade agreements with third countries, to the acceptance of the common commercial policy of the Union will result in minor changes only, as far as conditions of trade, including those with third (non-member) countries are concerned. Also, according to calculations, in case of Hungary for example, the change from national regime of Most-Favoured-Nation treatment of Russia to the GFS treatment extended to Russia by the Union will not imply any significant alteration of conditions of bilateral commerce. There is a mutual dependence on Russian exports of energy to CEE. For the CEEs, Russia is a cheap (relative to alternative sources), reliable, geographically near-by supplier of most of their needed imports of energy, with established and well-functioning transport infrastructure. For Russia, CEE remains the market outlet for a large part of its exports of oil and gas, and one of the important transit routes for its actual and potential energy exports to Western and Southern Europe, as well as Asia Minor. CEE is also an area for promising foreign investments of leading Russian oil and gas companies.Just the opposite seems to be the case with CEE exports to Russia: in macroeconomic sense, present trade data are witness of mutual „independence”, following the not-so-long process of smashing and deconstruction of large-scale business relations of the CMEA period. The Russian share in CEE exports is about 2 percent, while about 6 percent of total Russian imports come from CEE (the six former CMEA members). In such a situation it is simply irrelevant to raise the question of eventual further negative implications of CEEs’ full membership in the European Union. This is not to ignore the highly protectionist and divisive policies of the Union, aimed, first of all, at imposing more administrative controls and restrictions on crossing its borders by nationals (inhabitants) of non-member states, at limiting cross-border (shuttle) trading and employment (legal and illegal). The injurious negative human (regional) implications of those policies, the eventual difficulties of business as usual notwithstanding, the macro-economic impact of the measures for Russia-CEE trade seems to be limited. By all means, they should not conceal the deeper, basic causes of the decay in relations.

Duration:
2004
Project leader:
András Köves
Dokuments:

Productivity and convergence- the prospects of Hungary. Tendencies and correlations

At the invitation of the Institute for Economic and Entreprise Research of the Hungarian Chamber of Commerce and Industry (MKIK GVI), we participated in the preparation of the study entitled “Productivity and Convergence- The prospects of Hungary. Tendencies and correlations”.

Client:
published in MKIK GVI Research Papers, No. 2015/4. in November, 2015.
Duration:
2015
Project leader:
István János Tóth
Participants:
oltán Ádám (Kopint-Tárki), Sándor Katona (MKIK GVI), Zsófia Limbek (MKIK GVI), Gábor Oblath (Kopint-Tárki és MTA KRTK KTI), Éva Palócz (Kopint-Tárki), Anikó Sturcz (MKIK GVI) és István János Tóth (MTA KRTK KTI és MKIK GVI)
Dokuments:

No. 63, Judit Hamar (2001): Dual economy, the role of the MNC-s in Hungary and the EU-accession

The paper – by summarising our research results proceeded in 2000-2001 – gives some answers to the question whether the fast increasing presence of multinational companies (MNC-s) did and would increase the gap between development prospects of indigenous and foreign owned firms in Hungary, or not? Whether the negative effects of a dual type of economic development could be revised (at least moderated) by the economic policy or not? The analytical methods were to measure performance differences (and similarities) among company groups selected by the main ownership pattern. By using mathematical-statistical methods, the cross-section and factor analyses of the main economic indicators try to answer whether the MNC-s have typical or rather specific firm-attributes, or not? Research results proved that in Hungary ten years were enough to the foreign investors to reach almost the same dominant shares in most industrial sectors as in the Irish economy during a much longer time. But the first signals of a dual type of economic development (a clear advantages of the foreign owned firms compared to the indigenous ones) also emerged sooner (already in 1996) than in the other countries (such as in Ireland, Portugal, or Spain). The international comparison of earlier experiences of some peripheral countries (such as Ireland, Portugal, and Spain) revealed that the sudden huge FDI-inflows in a country would increase differences among the indigenous and foreign firms’ prospects. This pattern was general especially if the country offered large tax- and other incentives to attract foreign investment. Foreign investment by nature went on the activities where profitability was higher, and the better conditions of the foreign owned firms were multiplied not just by granted tax exemption and investment support, but by the fact, that foreign owned firms could employ skill-labour much easier even if there were shortages of them at the labour market. The Irish example, however, also proved that if the problem of the dual type of economic development could be detected in time, economic policy could lessen its negative effects by supporting education and home capital accumulation by offering positive discrimination to the indigenous firms (SME sector). An opposite example of Greece – where the EU-accession was accompanied with an economic policy which did not helped FDI-inflows for decades – provided arguments, that the problem of dual economy could emerge even without FDI, but parallel with the decline of the overall economy. Hungary followed the pattern of the those countries where economic liberalisation let a sudden and huge inflows of the FDI. But as the whole process went on faster than in those countries, a turning point of the trend seems to appear earlier, too. Since the first signals of dual economy emerged, indigenous firms also had produced a rapid improvement in performance, in export-ability and productivity, but the gap in some important economic indicators between indigenous and foreign owned companies had not diminished by 1999, even increased in some respects. The detailed mathematical-statistical analyses proved, that the clear advantages of foreign firms over indigenous ones exist at the group-aggregate level, but this is partially due to the increasing and newly emerging investment of the MNC-s, rather then their significantly different behaviour or factors. Inside each company group the variances were at least as large as among the different groups. Profitability linked more to export-orientation than to FDI. Since 1996, credits for investment have gained significant role, and the type of activity had become a determinant factor by 1999. FDI in food industry for example produced much less rate of return than in engineering, while earlier, location by sectors had no significant effects (opposite to the experiences before 1996, when the effects of sectors hardly could be observed).For policy conclusion, it is important, that those firms (even belonging to large global multinationals) which produced the most dynamic development, were not the same in 1999, than in 1996 or 1992. For future development the success of preparation for the EU-accession (the balance of gains and losses) will depend much more on the ability of indigenous firms to close the gap and to overcome their disadvantages compared to the foreign owned firms. Both the central government and local policy-makers must focus on harmonising their wishes for attracting further FDI by offering generous preferences and the aims of fostering the development of local indigenous enterprises and capital accumulation (even by positive discrimination given to local SME sector).

Duration:
2001
Project leader:
Judit Hamar
Dokuments:

For jobs! Entrepreneurial newsletter 1-15

In the framework of the TÁMOP 2.5.3.C-13 / 1-2013-0001- “For Work!” Program, the Kopint-Tárki research team produced 15 brief reports in the form of newsletters for the LIGA Trade Union-led consortium, which members were the Confederation of Hungarian Employers and Industrialists (BusinessHungary-MGYOSZ), the National Association of Entrepreneurs and Employers (VOSZ), and representatives of ESZA. The project took place between March 2014 and June 2015.

Client:
Confederation of Hungarian Employers and Industrialists
Duration:
2015
Project leader:
Zoltán Ádám
Participants:
Zoltán Ádám, Pál Emód, Éva Palócz
Dokuments:

No. 62, Tamás Réti (2000): Role of regional integration initiatives in trade liberalisation of transition economies

Various regional economic co-operation initiatives that have emerged since 1990 in Europe are part of a process of constructing the European economic area. Preferential trade arrangements established in this context intend, not to be inward-looking, but to facilitate the participation of their members in the world economy. The initiatives are part of a strategy to liberalise and open national economies and implement export- and foreign investment-led policies. For the participating transition economies, regional economic cooperation represents a useful support for their accession to the EU. During the twentieth century, economic co-operation between Central and Eastern European countries (CEECs) has gone through several radical changes. These generally small-sized economies concluded economic partnership agreements in the shadow of big powers (Germany and later the Soviet Union), which had strong political and economic interests in the region. Mutual economic relations were established on a bilateral basis and regional trade developed within this framework. Despite geographical proximity, mutual historical experiences and potential economic benefits stemming from regional cooperation, intra-regional trade tended to decrease. Political considerations were given priority, and comparative advantages remained under-utilised. The declining and limited scope of intra-regional trade has strengthened the conviction that small economies could not become natural partners and their relations could only be guaranteed through the intermediation of major economies in the region. The changes in the political systems of former socialist countries in 1989 resulted in an external opening and liberalisation of foreign trade and capital flows. At the beginning of 1990s, the Council for Mutual Economic Assistance (CMEA) was abolished and, following the emergence of custom tariffs and non-tariff barriers, trade among the CEECs, considerably decreased. The CEECs sought to promote economic connections primarily with the European Union. With the entry into force of the Europe Agreements (EA), trade barriers between East and West started to be dismantled and the pendulum has largely swung to the benefit of the relations with the West.In order to influence these trends, the so-called Visegrad Agreement was concluded in February 1991 among former Czechoslovakia, Hungary and Poland. The Agreement emphasised the existence of mutual economic and political interests, underlined the necessity for co-ordinating integration policies with the West, and stressed the need to further develop regional economic relations. In Visegrad, signatory countries expressed their common interests in relations with the West and agreed that their efforts would be more efficient if pursued jointly. Subsequently, their interest in mutual intra-regional trade was also clearly confirmed.The Central European Free Trade Agreement (CEFTA) was signed in 1992. In the beginning, the CEFTA was supported by two major factors. The EU promoted the idea that associated countries also needed to establish a free trade zone within the region. The EU thus provided external impetus in the creation of the CEFTA. The second major factor was the economically unjustified low level of eastern trade relations and the fact that their economic recovery would be enhanced by developing intra-regional trade. The CEFTA relied essentially on the trade part of the EA and set the goals of creating a free trade zone for industrial products in ten years and reducing trade barriers for trade in agriculture. The major difference between the two Agreements is that the EAs are based on the notion of asymmetry, while CEFTA seeks to exploit mutual benefits. The objective of the CEFTA was to create at least the same preferences as those provided by the EAs. The present paper examines the Europe Agreements and the CEFTA and considers their impact on trade flows and trade policy of transition economies. It analyses in more detail the Hungarian experience, including the development of direct investment inflows from Hungary to neighbouring countries.

Duration:
2000
Project leader:
Tamás Réti
Dokuments:

Methodological support for the determination of indicators and base value

The purpose of the study was to facilitate the development of a set of matching indicators for operational programs between 2014-2020, currently being finalized – GINOP, KEHOP, IKOP, EFOP, VEKOP, TOP and KÖFOP -, and, where possible, propose base and target values for these indicators. The European Commission examines the progress of the programs and the achievement of the indicators set by the programs along certain milestones (2018 and 2023), so it is of great importance that the given base, intermediate target and target values are realistically defined. An overview of the indicators of the OP draft was based on an indicator template, so based on a unified methodology, it was possible to evaluate the examined performance frame and result indicators, filter out the problems and assess the demand for potential alternative indicators.

Client:
Prime Minister’s Office
Duration:
2014
Project leader:
Katalin Nagy, Nóra Serfőző, Péter Vakhal

Preliminary study on macroeconomic and budgetary forecasting methodologies

At the request of the Fiscal Council of Hungary, we prepared a preliminary study on the development of a macromodel, which would strenghten the analytical capabilities of the institute as well as enable it to provide various forward looking analyzes, projections, bases and alternative scenarios. In our study, we proposed the main elements  and main characteristics of a macromodel that can be used by the Fiscal Council. In addition to the model for short-term macroeconomic forecasting, we also analyzed how the large investment in Paks can be incorporated into the model we have developed.

Client:
Fiscal Council of Hungary
Duration:
2014
Project leader:
Péter Vakhal
Participants:
Éva Palócz, Péter Vakhal
Dokuments: