Minister Márton Nagy in Davos: EU should take steps to strengthen new industries and competitiveness

The World Economic Forum, held annually in Davos, aims to encourage dialogue between the world's most influential politicians, business people and scientists on – among others - global economic and environmental issues, geopolitical and policy concerns. Márton Nagy attended the 2024 Forum, held between 15-19 January, and addressed the audience on Friday.

In his speech, the Minister of National Economy shared his thoughts on new economic trends, the dynamics of the transition to new industries and how to adapt to them, and he also gave a comprehensive assessment of the global economic environment.

Márton Nagy pointed out that the global economy is undergoing major structural changes, with Europe only adapting slowly to new trends, while Asian countries, especially China, have responded extremely successfully to recent global challenges, overcoming them and strengthening their own economies. He added that these countries have used all means to increase their competitiveness both domestically and in the global space. By contrast, the European Union could give the wrong response to the unfolding global aid race by pushing for a return to the Maastricht criteria, which would severely undermine the recovery while putting EU member states at a competitive disadvantage.

According to the International Monetary Fund, in the next five years, the United States and China, which participate in the state aid race, will run a 7 to 8 percent yearly budget deficit in proportion to the GDP, while the European Union keeps its at 2 to 3 percent of GDP. This means that the US and China will spend more than 20–25 percent of the GDP overall on the economy in the next five years.

The Minister of National Economy argues that in contrast to the rules of economic governance, which will be activated in 2024, as much of the budgetary resources as possible should be used to boost competitiveness and develop new industries. Temporarily higher budget deficits would not cause imbalances, as this would aim at restoring and strengthening economic growth in the EU.

Márton Nagy stressed that Hungary has learned that lasting economic development and peace can only be achieved through international relations based on mutual respect. That is why Hungary's goal for the future will remain to use its favorable geographical position to become a meeting point for Eastern and Western economies and technologies. The Hungarian Prime Minister's policy of opening to the East is successful; the share of foreign direct investment from Eastern countries in Hungary rose from 10 percent in 2010 to the current 34 percent. This government strategy benefits the national economy for three reasons.

First of all, Hungarian exports can rise to 100 percent of GDP by 2030, while FDI stock, currently worth EUR 100 billion, can double. Secondly, the multiplier effect of the inflow of FDI is also beneficial, both by boosting R&D through horizontal and vertical integration with universities and by strengthening domestic businesses by linking them into and positioning them higher in supply chains. Thirdly, the widening of logistics opportunities is also noteworthy, which could raise the output of the logistics sector from 5 to 10 percent of GDP by 2030.

He also emphasized that Hungary is pursuing its own strategy, thus striving for a connecting role. This is also exemplified by the development of the Hungarian automotive industry, where the entire supply chain of the electric vehicle ecosystem is being built with the joint participation of Western and Eastern companies. German car manufacturers like Audi and Chinese battery manufacturers like CATL are joining forces in Hungary, and Chinese electric vehicle manufacturers like BYD are launching their first EU production in Hungary.

Finally, Márton Nagy made it clear that Hungary is doing its utmost to increase its competitiveness. Thus, instead of pushing for a return to the administrative and financial criteria of 30 years ago, the European Union must also urgently take steps to strengthen its new industry and its competitiveness.

(Ministry for National Economy)