Prime Minister Viktor Orbán has called for significant wage rises, during a conference of the European Bank for Reconstruction and Development (EBRD).
The prime minister argued that an end has come to a period in Hungary’s economic development during which competitiveness primarily stemmed from cheap labor. Hungary and Central Europe must face up to the phenomenon of “wage pressure”: the fact that political reality and economic development demand higher wages, he said.
At the same time, the prime minister stressed that only businesses which are competitive are able to pay higher wages. It also follows from this, he explained, that the budget should withdraw less and less in terms of financial resources from the economy through taxation.
It is therefore necessary to simplify the corporation tax system, he said, and the current 19 percent rate will have to be reduced over the next few years.
Listing the tasks in hand, the prime minister said that personal income tax will also have to be further reduced, and a reduction in payroll taxes is likewise inevitable.
Also among the tasks he mentioned were that businesses must be encouraged to increase their expenditure on research and development, and that state bureaucracy must be reduced.
PM Orbán also stressed that benefits related to the raising of children which are available through employment must be further developed; the workforce must become more competitive; there is a need for an adequately competitive banking sector and a competitive system of financial intermediaries.
Speaking about the banking sector, he said that “it is in good shape, and the extremely difficult and long shadow of earlier years is gradually disappearing”. The sector generates substantial revenues, he continued, but still falls behind the international vanguard in terms of efficiency and the use of new technologies.
PM Orbán also said that he agrees with the President of the EBRD that it will be difficult to create competitive economies in the region without the development of stock exchanges.
Regarding the economic policies of the past six years, the prime minister pointed out that his government has simultaneously begun to employ an economic policy mix seeking to achieve growth, fiscal discipline, rising employment and lower government debt. According to the textbooks this is not possible, he said; but practice proves that all these things can be achieved at the same time if we discard old habits.