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THE ESF IN HUNGARY
The ESF is taking measures to raise employment levels in Hungary, which are comparatively low.
Improvements to the education and vocational training system are helping young people get the
skills they need for better job prospects. And people from disadvantaged groups are also supported
to find jobs, such as the low-skilled, the young, women and the Roma.
More people in work
Getting more people into work is a key ESF priority and providing better access to training and jobs for
everyone is helping achieve this goal. Women with young children are encouraged back into work with
better childcare provision, flexible working arrangements and vocational training opportunities. With
fewer agricultural jobs, the ESF is also encouraging people to move to regions that have jobs on offer,
and projects are helping reduce regional differences – for example, by supporting children in rural and
Roma communities to stay on at school and get qualifications.
Across Hungary, workers are getting new skills and learning to adapt. Many projects are helping those
with few skills or qualifications to catch up on learning and gain the qualifications that will improve their
job prospects.
Better skills and jobs
ESF funding is modernising the education and training system to provide the skills that workers and
companies need. One such example is a manufacturing company in Budapest whose workers trained in
lean-manufacturing techniques – thus safeguarding hundreds of jobs. Teachers are learning new methods
with ESF help, and universities are boosting their capacities for research and development. And tertiary
education is now better aligned with workforce and industry’s needs, for example through an ESF
initiative that tracks students’ subsequent careers to ensure university curricula are giving them the right
skills. The ESF is also helping retain talented graduates in the country, by funding R&D activities at
Hungarian universities in co-operation with industry.
All these projects are helping Hungary build a workforce that can contribute and prosper in an innovative
knowledge-economy.
ESF budget 2007-2013
Europe 2020 in Hungary
The Country-specific Recommendations are documents prepared by the European Commission for each
country, analysing its economic situation and providing recommendations on measures it should adopt
over the coming 18 months. They are tailored to the particular issues the Member State is facing and
cover a broad range of topics: the state of public finances, reforms of pension systems, measures to create
jobs and to fight unemployment, education and innovation challenges, etc. The final adoption of Countryspecific Recommendations prepared by the Commission is done at the highest level by national leaders in
the European Council.
Country overview
A weak country growth potential related to a worsening business environment, which is to a large extent
driven by the lack of predictability and distortive effects of government policies. These measures have
contributed to a quick pace of banking sector deleveraging and declining investment demand, resulting in
a historically low investment rate and reduced lending. Finally, Hungary was identified by the
Commission this year as experiencing macroeconomic imbalances.
After fiscal loosening in 2010 and 2011, the government made considerable consolidation efforts and
reached a deficit of 1.9% of GDP in 2012, well below the target of 2.5%. While the Commission 2013
Spring Forecast projects a renewed breach of the 3% of GDP by 2014, consolidation steps announced on
13 May for 2013 and 2014 should sustainably correct the excessive deficit.
However, Hungary faces serious challenges in the short- to medium term, related to the business and legal
environment and economic growth potential, which could also undermine the success of fiscal
consolidation.
2013 European Commission's recommendations for Hungary in brief
The Commission has issued seven country specific recommendations (CSRs) to Hungary to help it
improve its economic performance. These are in the areas of:
1. Sustainable public finances
Hungary has managed to keep its deficit below 3% in 2012. However, the corrective measures were
mainly concentrated on the revenue side, raising questions about the sustainability of the consolidation
efforts. Following the release of the Commission 2013 spring forecast, the government adopted an
additional set of measures to close the fiscal gap for 2013 and 2014 so that it is projected to remain
below the 3% of GDP in both years. Strengthening the medium term budgetary framework and
widening the remit of the Fiscal Council would also help to underpin recent reforms to the fiscal
framework.
2. The financial sector
Restoring normal lending to the economy, together with improving the business environment, is a key
challenge for the Hungarian economy. Decreased taxation of the financial sector and managing the
deteriorating portfolio quality would help banks' internal capital accumulation and therefore ease the
flow of lending. In case it needs to act to safeguard financial stability, Hungary should ensure effective
emergency powers are given to the financial supervisor and establish a resolution mechanism.
3. The taxation system
Frequent changes in the design of the tax system and several surtaxes could have further distortive and
dampening effects on growth. Furthermore, the existence of several different tax rates across corporate
sectors hampers the effective allocation of resources and affects investment and lending. The
complexity of the system is also a source of high compliance costs for businesses. The tax wedge on
low wage earners is still high and a refining of the Job Protection Act to better target this group is
necessary. Hungary should effectively fight against tax non-compliance to increase revenues and
fairness.
4. Labour market and poverty
In Hungary a low employment rate is paired with one of the lowest rate of labour market participation in
the EU. Unemployment risks are higher for low-skilled workers, youth, women, especially those with
children, and older workers. Hungary should enhance the Public Employment Service and promote
active labour market policies and lifelong learning. The social situation continues to worsen with 31 %
of the population at risk of poverty or social exclusion and a high percentage of people facing severe
material deprivation. Poverty continues to disproportionately affect disadvantaged territories and
communities, in particular the Roma and should be urgently addressed through the National Social
Inclusion Strategy.
5. Business environment
The business environment is one of the main concerns in Hungary and has deteriorated due to a series of
measures, including restrictions on investors and an unstable regulatory framework, particularly for
services. Businesses would benefit from reduced administrative burden, less corruption and more
competition in the public procurement.
6. Education
Although, Hungary had some success in lowering the number of Early School Leavers in the last
decade, the trend was reversed in 2011. There is also a concern about whether the on-going highereducation reform can improve access for disadvantaged pupils. Hungary should implement measures to
tackle these issues.
7. Energy and transport sectors Long-delayed reforms in the energy and transport sectors are having a
detrimental effect on public finances and growth in Hungary. Energy prices for certain groups of
customers are still heavily regulated and should be gradually phased out, whilst protecting the
economically vulnerable. Public transport should be made more cost efficient to improve sustainability.
Tertiary education