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The Hungarian economy can make big strides if it prepares for the post-Covid-19 epidemic, according to a recent analysis by McKinsey & Company, showing that there is significant growth potential in the Hungarian economy in the decade after the coronavirus crisis. .
The next ten years will be of strategic importance in the life of the Hungarian economy.
Levente Jánoskuti, a senior partner in McKinsey’s Budapest office, said during a background discussion on the analysis. The key question is whether Hungary can continue the recovery it has achieved in the last 15 years, that is, that we have come close to the EU average, and even our recovery has accelerated in the last five years.
In detail, András Havas, a partner at McKinsey, spoke about the relatively slow growth of the Hungarian economy between 2010 and 2015 (an average annual real GDP growth of 2.1 percent was expected), then accelerated between 2015 and 2019 : In recent years, real GDP grew by 4.1 percent, higher than the average for the other V4 countries (3.4 percent), as well as the euro area average (1.9 percent ). This, he said, was mainly due to productivity growth. “Competitiveness was the key to economic growth,” András Havas said.
According to the analysis carried out by Jánoskuti and Havas
Improving productivity and competitiveness in the post-pandemic crisis is (will be) a priority for Hungary’s long-term future.
Four factors have been identified as those that can best contribute to improving competitiveness, including productivity:
- a well-thought-out investment stimulus based on direct foreign investment and, increasingly, domestic savings;
- developing the workforce with an equal focus on basic skills in the 21st century and closing the skills gap;
- innovation driven by research and development programs, leveraging the momentum of digital transformation accelerated by the epidemic;
- and an enabling environment that includes appropriate institutional frameworks, regulations, and a broader set of economic recovery factors.
According to Havas, we are currently facing challenges that are also opportunities: supply chains have become closer to consumers, expectations in the workplace have become more flexible, and digitization has accelerated. Due to the closure of country borders and various adjustments, the former seems quite clear, as does the acceleration of digitization. Regarding job expectations, however, he noted that the situation caused by the pandemic had opened opportunities for many people who, for various reasons, had not been able to enter the job market in the recent past, just think of mothers or retirees.
New social groups can be included in the labor market
– stressed the expert, adding that this could mean up to 200 thousand new people in employment.
In examining productivity, they examined 13 industries and found that there is potential for competitiveness in terms of contribution to GDP in most sectors. Snowy highlighted manufacturing, construction and commerce, which already have the most potential due to their size and productivity. According to him, half of the growth will come from these three sectors.
We could be at the level of the current eurozone in ten years
They have been calculated for a period of ten years: according to its baseline scenario, the Hungarian economy could grow by an average of 2.2 percent annually by 2030, but according to the authors of the analysis, 4 percent of GDP growth , although Havas added that it would be a “great success”. If this were to be achieved, it would systematically exceed the eurozone average, so Hungary would reach the current eurozone level in a decade, that is, it would remain there in 2030, as it is now in the eurozone. (For example, the country has managed to exceed the monetary union level of 2000 in 14 years).
They estimate that the world economy could return to pre-pandemic levels between mid-2021 and the second half of 2023, depending on different scenarios.
According to Jánoskuti, by the time this happens, “Hungary should be ready to shift to a higher gear.” For this, it is essential that both the leaders of the public and private sectors aim to increase competitiveness, which will mark the axis of the coming years. At the same time, regional disparities within the country in terms of income, productivity, education and healthcare must be addressed to lay the foundation for growth, the McKinsey partner said.
(Cover image: Liquid hand and surface sanitizer is packaged in a business lobby in Miskolc at the Borsod County headquarters during the coronavirus epidemic on April 29, 2020. Photo: János Vajda / MTI)
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