Regional competitive index: Hungary is at the bottom of the heap

A few days ago Hungarians heard from several politicians that their country is witnessing the best economic growth in living memory. Unfortunately, at about the same time the European Union released its regional competitiveness statistics, published every three years. There is a jarring dissonance between the empty words uttered by Prime Minister Viktor Orbán, National Bank Chairman György Matolcsy, and Economic Minister Mihály Varga and reality. The EU’s statistics reveal the true state of the Hungarian economy and the living standards of its inhabitants.

Hungary’s standing in comparison to other countries dropped between 2013 and 2016, and the overall economic well-being of the country is depressingly sub-par. The very first thing that struck me when I took a look at the “European Regional Competitive Index” was that all the talk about the poor quality of Hungarian healthcare and basic education is right on target. Government propaganda can try to make excuses for the dismal results of the PISA test, but those figures are now supported by the statistics of the competitive index. I’m sure that we will hear government sources doubting the validity of this survey, but evidence is piling up that there is something very wrong with the Hungarian educational system and healthcare.

As a first step I used the handy “region benchmarker” and compared Hungary to the three other V4 countries and Slovenia in eleven categories–institutions, macroeconomic stability, infrastructure, health, basic education, higher education and lifelong learning, labor market efficiency, market size, technological readiness, business sophistication, and innovation–all measured on a scale of 0 to 100. Overall, Slovakia and Hungary got the same score: 33. They ranked lowest of the five countries, trailing Poland (55), Slovenia (54), and the Czech Republic (49). When it comes to health, the situation is indescribably bad: Hungary (38), Poland (76), Slovenia (84), Czech Republic (67), and Slovakia (55). As far as basic education is concerned, Hungary fares better than Slovakia (44 as compared to 33), but if we compare its score to those of Poland (64), Slovenia (83), and the Czech Republic (62), Hungary should hang its head in shame. The situation is even worse in higher education and lifelong learning. In the latter case even Slovakia beats Hungary.

Let’s move on to the regional comparisons. There are 263 regions in the European Union and seven in Hungary: Central Hungary, Central Transdanubia, Western Transdanubia, South Transdanubia, Northern Hungary, Northern Great Plains, and Southern Great Plains. Since 2013 the standing of all seven regions has worsened. Index published a handy table showing the decline throughout the country.

Northern Hungary, which was one of the poorest regions of the Union already in 2013, has declined further. Just to give an idea of the situation in that northeastern corner of the country, here are some figures. As far as GDP per capita is concerned, the region ranks 256th out of the 263 regions. Or, put another way, if the EU-28 average is 100, Northern Hungary’s score is 40. (Luxembourg clocks in at 269.) Even more shocking is the state of health in the region. It ended up being 262nd out of 263.

Northern Hungary might be the worst off region in the country overall, but it is not all that much worse than the Northern Great Plains region, Southern Transdanubia, and the Southern Great Plains. The Northern Great Plains region, which is adjacent to Northern Hungary, is also extremely poor. Overall, it ended up being in 232nd place with an extremely low GDP per capita: 42% of the European average (or 256/263). The Southern Great Plains region is a tad better off. Its GDP per capita is 46% of the EU average (252/263), its overall rank 224/263. And let’s not forget about the Southern Transdanubia region where the GDP per capita is 44% of the EU average (253/263). Thus, large parts of the country are exceedingly poor.

But let’s move on to the “rich” areas of the country. The best off is Central Hungary, an area that includes Budapest. As far as its GDP per capita is concerned, the region is reasonably well off (84/263). However, when it comes to competitiveness, the region is only in 152nd place, which foreshadows slower growth in the future.

Since Viktor Orbán only a few days ago talked about the “complicated ethnic relations” of Hungary, I should point out that in both the Northern Hungarian and the Southern Transdanubian regions large Roma communities live in extreme poverty. So far very little has been done to improve the lot of these Gypsy communities.

Three sociologists put together an excellent study examining the situation in the Sellye-Siklós region of Baranya County and the sub-region around Encs in Borsod-Abaúj-Zemplén County. The country desperately needs a program that might help these regions offer a half decent existence to their inhabitants. And the country must revive Hungarian education and reform healthcare nationwide. Instead, Viktor Orbán had dreams of hosting the Olympic Games and builds one football stadium after the other. All this while “the country is rotting,” as one headline announced the publication of the European Regional Competitive Index.

March 3, 2017
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Ferenc
Guest

There’s something wrong in the table, if the relating text is correct (noticed same at index). All regions have in 2016 a higher value than in 2013………… Years on top of the columns are switched around?

Ferenc
Guest

Sorry, my misinterpretation in the table are positions and not values…..
PS: personally prefer values instead of positions, as these show more objectively what’s happening (and you can still compare to other countries by including their values)

Ferenc
Guest

Regarding healthcare the most pathetic thing I heard is that there are (again/still) plans for a (one!) ‘SUPER’-hospital.
So NOT making all over the country hospitals better for all Hungarians in need of medical care, but in Budapest a SUPER one…..that really helps………

Roderick S. Beck
Guest

It is a balancing act. Cities are more efficient than rural areas. It is inherently more attractive and less expensive to build a large hospital for a major city than lots of small hospitals. I would suggest a super hospital for Budapest if the space can be located and one medium size hospital for each region. Nonetheless, health care may be the tail, not the head. What the rural areas need are vibrant local economies and they don’t have them. Stagnation reflects 1. limits on foreign investment in Hungarian agriculture 2. lack of agriculture research stations to educate Hungarian farmers 3. Poor local transportation and telecommunications infrastructure and 4. dismally conservative Hungarian culture.

Observer
Guest

I told you so!

Hate this expression, partially because it only provokes even more obstinate denial of the reality in Hungary. Just like the appointed Lying Toads, who wanted everyone to believe not their own ears and eyes. This may be adopted in the future, see Edwin Martin about N.Korea. (OK, we know it’s money, but the world talks about a ….. Hungarian).

Roderick S. Beck
Guest

A vibrant rural economy requires a healthy agricultural sector. My guess is that Hungarian farmers are not business savvy. How much does Hungary into educating its farmers about new technology and business practices. How good is local education? And how about infrastructure ranging from trains to roads? Despite European animus towards OGMs, US agriculture is one of the strongest in the world and China is a very big customer. Also I expect Hungarian hostility towards foreign investments stifles Hungarian agriculture.

Istvan
Guest
China is the USA’s second largest agricultural export market, about $20 billion a year, the first is Canada at $24 billion, third is Mexico at $18 billion. Our exports to Mexico and China are largely not processed agricultural products, and given the mechanization of US agriculture these exports are generating ever fewer jobs on a yearly basis relative to the export dollars involved. Our agricultural trade with Canada is far more labor intensive and generates much more employment in the USA. A big problem for Hungarian agriculture is Russia’s mechanization of this sector and Putin’s efforts to minimize Russia’s reliance on markets he cannot control amid the collapse in the price of oil, the ruble’s plunge and the EU’s anti-Russian sanctions, which persist due to the Russian occupation of the Crimea. Russian sugar and meat producer Ros Agro Plc, which is controlled by billionaire Vadim Moshkovich received about 3 billion rubles (46 million dollars) in state support and paid zero tax on profits. This helped increase its net earnings margin to 33 percent, 28 points more than the Russian oil giant Lukoil, according to Bloomberg News. Russia overtook the US in 2016 to become the biggest exporter of wheat in… Read more »
Member

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Member

Export is way up, but the wheat PRODUCTION was not that much higher than at the collapse of the Soviet Union until 2014. The weather was exceptionally good in the last few years. (is this the result of the global warming?)

1992: 46.2 million metric tons
2012: 37.7

2013: 52.1
2014: 59.1
2015: 61.0
2016: 72.0

http://www.indexmundi.com/agriculture/?country=ru&commodity=wheat&graph=production

Roderick S. Beck
Guest

Wheat is a commodity. Hungarian agriculture needs diversity.

Guest

Totally agree – products that add value!
Aa another example – there is a Spanish paprika specialty:
Pimientos tipo Padrone, small but not hot peppers which you fry in olive oil. My wife hadn’t known those (and she knows almost all Hungarian food …) but was immediately delighted when she tried it the first time I made it in Germany. Noe we buy it regularly, in Germany (like in Spain) it’s available all year round coming from Spain, the Canary Islands or Morocco in winter.

Once we saw it in a German supermarket produced in Hungary by Vetter, but never ever in a Hungarian supermarket, why?
Of course no Hungarian will pay 6€ for a kilo of peppers in summer or 10€ in winter!
So it’s also question of advertising high value products.

Roderick Beck
Guest

Why restrict it to the domestic market? Export it.

Guest

That’s exactly what they’re doing – maybe I didn’t make myself clear enough.

Observer
Guest

Hungarian agriculture needs better quality and mostly vertical value adding chain.

Member

Hungarian wheat production peaked in 1984.

1984: 7.4 million metric tons
1992: 3.4
2012: 4.0

2013: 5.1
2014: 5.3
2015: 5.3
2016: 5.6

http://www.ksh.hu/docs/hun/xstadat/xstadat_eves/i_omn012b.html
http://www.fao.org/faostat/en/#data/QC

Member

Let us compare this with the Romanian wheat production.

1984: 7.4 million metric tons
1992: 3.2
2012: 5.3

2013: 7.3
2014: 7.6
2015: 7.8
2016: 8.4

https://seenews.com/news/romanias-wheat-crop-rises-7-in-2016-media-537148

pappp
Guest
Agriculture in Hungary employs about 2-3% of the population. (That’s down from about 40-50% at the end of WWII). Maybe double that if you include the food processing industry (but those mostly aren’t located in very rural areas but provincial towns and in many cases ingredients are imported). And technology relentlessly improves efficiency. And the more efficiency and technology you inject into the system (using US methods etc.) the less people will be required. By the way Hungarian agriculture in terms of volume has surpassed its historical peak year achieved in 1985 thus it’s unlikely to increase output significantly in the future. As a result, it is totally unrealistic to expect that agriculture will ever or could in theory employ significantly more people in rural areas. It’s never gonna happen. Rural economies need income which could be spent – but there are no jobs (there’s no industry and services very often need larger communities to be profitable, ie. cities). Certainly agriculture will never provide those jobs. There is just so much land in Hungary and therefore the potential of land to employ people or provide income is extremely limited. This used to be called “the agrarian question” (az agrárkérdés). Forced… Read more »
Guest
Actually at least her in Zala county there is still some land lying bare – not interesting for the “big players” probably. Of course it could be used for labour-intensive plants – but nobody is intereted in this and I don’t know if it would be competitive. I think however Hungary could do more in high quality agriculture. Two examples for that: There is a German company “Vetter Hungary” whose boss somehow realised that that sandy soil in the East near Kecskemét which was considered useless was perfect for Asparagus (around 20 years ago) and he started a business there – now has his own trucks bringing not only first class asparagus to Germany where he gets a good price. And from personal experience here: The son in law of one of my neighbours got from his father and father in law maybe a milion Forint with which after 1989 he bought some machines from the old “Kolchose” which was abolished – over the next 25 years he built a small enterprise, always reinvesting the money – now he has the latest machines from New Holland and Claas and produces corn, wheat, sunflowers for all of Europe. But he still… Read more »
pappp
Guest
Labor intensive projects have one problem where to get (cheap and reliable) labor from? For example Serbia became a leader (at least in Europe) in raspberry growing (a Hungarian variety originally from Fertőd) meanwhile raspberry was all but abandoned in Hungary (though partly because of the climate change). Serbia’s labor is less mobile and poorer (accepting lower wages) and agriculture is not incentivized to produce only corn, wheat etc. as much as it is in Hungary so Serbs pruduce huge amounts from this relatively high value added crop. Actually I agree with the contention that know-how, innovation or even going back to old methods (like French or Bulgarian intensive gardening methods) are totally lacking and there’s no interest whatsoever in changing. Even the formerly significant “háztáji” (the small-scale gardening of one’s own garden) is out of fashion, it’s cheaper to go to Aldi or Tesco and purchase some imported stuff. I’m just very doubtful that such changes at the margins could work on a larger scale and could change lives meaningfully. In every area of life it is true that the potential is there and Hungarians are not even using their available potential – in rural life however the potential… Read more »
Guest

If we follow your ideas then Hungary is nowhere competitive (because of low productivity) – unless the wages are reduced even more!

Becuase raising the productivity is a dream – because “those who can” are already doing it often in Western Europe …) and the others, like the közmunkás – un
fit for any work more complicated than sweeping?
I’ve followed these developments – when German textile companies e g had seamstresses in Hungary for some years – and then moved to the East eg for many years, it wasn’t pretty when companies just closed down because wages got to high and whole villages/cities went out of work …

Btw we had the same situation in Germany soon after WW2 – but we adopted, while in Hungary?

And on the other hand companies in Körmend and Zalaégerszeg are looking for qualified workers and don’t find enough – how come?

Something’s terribly rotten in the state of Hungary!

pappp
Guest

From Körmend or Zalaegerszeg it is very easy to move to or commute to Austria (many people have relatives who work there) and make 5 times as much. So there’s a permanent shortage of workers and there will always be.

People from the East of Hungary will not move to small towns like Körmend or Zalaegerszeg. It’s too risky to move for a job. You get fired and then you are stuck in a small(ish) town. Maybe you can move to Győr where there are more opportunities even if you are fired.

If you decide to move away from the other part of Hungary (which is a big decision) you might as well move to Germany or Austria so this is what people tend to do.

Roderick S. Beck
Guest

Pappp, poor countries that follow good policies do catch up. Czech Republic did despite your arguments suggesting that poor countries like Hungary are stuck in a poverty trap.

Guest

You’re describing another typical Hungarian problem:
Low mobility of the people.
My wife on the other hand moved from East Hungary to Hévíz (avtually to a small village some kms away – she couldn’t afford to rent an apartment in Hévíz …) – and of cours I’m happy, we wouldn’t have met otherwise!

But my example of the asparagus company – and Mercedes Benz in Kecskemét show that industry can come to the East!
Why not more?
Hint:
Fidesz has incentives – but who gets that money?

Roderick S. Beck
Guest

Hungary has excellent farm land. I would wager that foreign farmers would perform vastly superior to Hungarian farmers. The issue is not labor costs. Hungarian labor costs are very low. The issue is very little value-added in Hungarian farming.

http://edition.cnn.com/2017/03/04/politics/trump-obama-wiretap-tweet/index.html

Roderick S. Beck
Guest
Observer
Guest

I doubt that small holding production was ever significant on GDP scale, where the whole agri sector was approx 5-6% GDP, a bit more in bumper years.
It was definitely inefficient because of the small scale (average 2 hectares 10 years ago), undercapitalization and the inadequate processing facilities/technologies.
In theory the concentration of agri land into larger economic units (fidesz clients) should mend the above problems.

Roderick Beck
Guest

Making it difficult for foreigners to buy Hungarian land slows consolidation.

Roderick S. Beck
Guest

You are missing the point. You are focusing on job creation. The key is to have healthy industries. Healthy agriculture means more construction, demand for business services, etc. It is a web.

pappp
Guest

I think you misunderstand causation. Competitive countries have competitive agriculture. Uncompetitive countries (economies) like Hungary have uncompetitive agriculture. You can’t rip Hungarian agriculture out of the economy and say that if it was in a better shape Hungary (or Hungary’s rural portion) could get richer and catch up to the West – agricultural production is just one segment (and not a too big at that) of the overall economy.

If and when Hungary’s economy will be more competitive, and there will be more money to spend by local consumers agriculture will also catch up and change for the better.

Member

A good article today about the plight of the rural areas of Hungary by György Raskó.

1989: 1.2 million
2016: 0.1 million families made a living from agriculture.

http://nepszava.hu/cikk/1122494-rasko-gyorgy-paks-2-helyett-inkabb-a-falvakat-elesszek-ujja

David North
Guest
A neighbour, who is certainly not a Fidesz supporter (neither am I) makes this comment on Eva Balogh’s post: “The ongoing poverty described for sure has to do with the governance of the FIDESZ party. However the miserable economical and social conditions came into being under the previous MSZP-SZDSZ governments which accepted the ideological and economic expectations of the West, in particular the IMF. The consequences were disastrous…” My friend makes the point that much Western criticism of Orban plays into his hands, as it enables him to pose as a patriot who is defending Hungary from foreign interference, always a touchy subject. In short, the remedy lies in Hungary. Here, things are moving, albeit with glacial slowness. Laszlo Botka’s call for Ferenc Gyurcsany and Orban to stand down was one such sign. The socialists will never recover while Gyurcsany is on the scene and his continued presence is an act of supreme arrogance and selfishness. What we need is an electorate that is a lot savvier politically, something that is difficult to achieve when there is so much disillusionment and so much energy has to be expended on simply scraping a living. To the extent that Spectrum is catering… Read more »
Guest

” Here, things are moving, albeit with glacial slowness. Laszlo Botka’s call for Ferenc Gyurcsany and Orban to stand down was one such sign.”

I can’t think of anything more ridiculous than a candidate for election asking other candidates that he cannot beat to refrain from running.

Guest

Come on – Fidesz was in power before MSZP and now again for seven years!
The Hungarian motto:
It’s always someone else’s fault …

Roderick S. Beck
Guest

You are just plain wrong. Hungary dragged its feet on liberalizing the economy after the Wall fell. And that reluctance was common to both the Hungarian Left and Right. It is bullocks to claim it is a left wing legacy. In contrast, the Czech Republic charged forward and now has a much high standard of living. And talk about the IMF is Populist Rubbish. Hungary today still have a lots of state owned companies, most performing poorly and being exploited as debt vehicles for local governments. The entire clamor when MAV airline collapsed is indicative of the backward thinking that infests the country. Most developed countries don’t have a ‘national airline’.

Guest

Yes, Malev is a very good example of something going horribly wrong – not once, but several times.
Has this case been analysed anywhere in detail?

Member

The original sin was committed by the Antall & Boross governments between 1990 and 1994. Most state-owned industries were closed down by fiat, most agricultural cooperatives were disbanded forcibly for political reasons, in order to destroy the successful elements of the Hungarian Communist system.

The Czechs did the transition much smarter. They did not destroy their industrial basis abruptly, but let the market forces make the transition.

Roderick Beck
Guest

The Czechs sold off it within 18 months and what was not purchased was shut down.

wrfree
Guest
‘Education without values, as useful as it is, seems rather to make man a more clever devil’… CS Lewis And so it is that we can see leaders acting as ‘clever devils’ in the country of their charge. As far as values we cannot say there are none. But arguably they look to be the wrong ones as the actions of history across 10 centuries appear to not have impressed upon them certain insights when forging paths for the country. So the drumbeat…education, education, education, education. One word which opens up worlds upon worlds individually and for the entire nation and its communities. Personally, I owe everything to my mother, a virtually uneducated immigrant from Magyarorszag, who saw the ‘values’ inherent in education. I do not know where I would be today without it. And in contrast I find it incredulous how the leadership ‘lights’ of the land have failed to make the country succeed in the endeavor. It is an indictment of their poor skills in governing the country and their unconcern for the development of its citizens. They are not only clever but windbags all who should be realigning priorities. If not pretty soon all ‘lights’ will go… Read more »
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