Hungary has improved its competitiveness ranking

The World Economic Forum (WEF) compiled again – as it does every year – the competitiveness ranking of the countries worldwide of this year. The Competitiveness Index summarizes the 114 indicators across 12 pillars that measure the competitiveness of a country. From Hungary, Kopint-Tárki transfers most of the data to the World Economic Forum.

The current list has provided many suprises. Although Switzerland continues to be the most competitive country in the world, the United States barely stayed out of the first place. While the improvement of the US is more and more spectacular every year, Europe is lagging- increasingly – behind its main rivals, Japan and the US.  WEF compose the 144 competitiveness indexes into 12 pillars, which are built on each other as a pyramid, according to a strict hierarchy. In an EU-Japan-US comparison, the EU, with one exception, is the last in every pillar. Japan has a very good foundation (good institutional system, infrastructure, basic education and healthcare), and the US is world leader in innovation and business complexity. The EU lags behind and conserves it mainly because of its heterogeneity – while the EU15 is in the top sixth of the competitiveness ranking, the later acceding Member States are in the middle of the list, thus significantly undermining the EU average.

Hungary last year closed the list at the 69th place generating great media attention, currently improving 9 places, it is the 60th in the ranking. The improvement is primarily due to the merit of companies, with a few flaws, as the change was forced by the market. The chronic lack of skilled workers must be counterbalanced by capital investment, so we could have seen progress in innovation-related indicators. Low interest rate and the government’s pursuit to attract large investors to the country provided a pleasant environment for this. In addition to this, Hungary has excellent public health (not to be confused with healthcare), good public security and there is no terrorist threat.

However, in some of the most critical competitiveness points, it was not possible to move forward, and even in some cases, a further downturn occurred. The weakest point in the overall competitiveness of Hungary is the adverse selection of the government. This is also the source of most of the problems in the institutional system, which has led to many criticisms of the justice system. The direct consequence of this is the fact that trust in politicians is one of the worst in the world.  Another consequence of the bad institutional system is the fact that companies do not always behave ethically.

The other serious problem is the quality of education, from elementary school to higher education. The proportion of those leaving school is relatively high compared to Europe, and the decrease of the compulsory schooling age had also a negative effect on the average educational level. The digitalization of educational institutions and teaching materials is slow, and the same applies to vocational training. One consequence of this is that the productivity of the Hungarian labour force is roughly half the EU15 average. The economy is unable to retain Hungarian talent and can not attract foreigners to Hungary.

Hungary’s progress is a welcome step forwards, however, the basic problems were not solved, in fact, they even deepened. The development of companies was inevitable, but if the external conditions turn worse, then without proper funds, the competitiveness of Hungary may again deteriorate.

Further information can be found here in Hungarian.

Map of competitiveness in Europe