Economy
Hungary needs new growth model
The Transition Report 2017-18 finds that middle‐income economies, on average, tend to experience a slowdown in productivity growth at income levels between one third and two thirds of that of the US.
Furthermore, growth in many economies in the EBRD region is lagging behind even that of comparable middle‐income countries.
“Increasing import competition, providing export market access and integration into global value chains can stimulate such firms to raise their efficiency. They can do so through innovation and investment in a more modern capital stock," the EBRD said.
Evidence from major upgrades to Turkey’s road network demonstrates how improved market access can generate new trade links and expand the variety of products that are available to consumers. The resulting gains in employment can also reduce emigration from previously isolated regions. Transport infrastructure can therefore not only contribute to competitiveness and the integration of markets but also to opening up opportunities for income growth in economically disadvantaged locations, the EBRD added.
According to EBRD data, motorway networks remain limited throughout the EBRD, except for Croatia and Slovenia. The length of motorway per one million inhabitant remains under 100 kilometres in most of these economies.
Infrastructure upgrade needs as a percentage of GDP vary greatly in the 2018-2022 period, and the ratios are typically the lowest in Central and Eastern European EU member states. According to an EBRD chart, the ratio in Hungary is below 10%, while it exceeds 80% in Mongolia.
Despite significant progress since the 1990s, emissions of greenhouse gases across the region are still substantially above those of comparable emerging markets, raising concerns about the long‐term sustainability of economic growth across the EBRD region. Stricter policies, starting with eliminating energy subsidies, are needed to meet the Paris Agreement commitments, the bank added.
Furthermore, growth in many economies in the EBRD region is lagging behind even that of comparable middle‐income countries.
Having exhausted the advantages that underpinned their strong growth performance in the past, the EBRD economies now require a new growth model. This model has to be based on innovation, going beyond the importing of foreign technologies.
The Report’s analysis also shows that the recent slowdown in productivity growth partly reflects that the EBRD region is home to many small and stagnant firms that are relatively inefficient.“Increasing import competition, providing export market access and integration into global value chains can stimulate such firms to raise their efficiency. They can do so through innovation and investment in a more modern capital stock," the EBRD said.
The Report’s estimates show that infrastructure investments account for about 40% of capital needs. Over the next five years, the region needs to invest about EUR 1.9 trillion in infrastructure in order to support its growth. It also estimates that 64% of this sum needs to be spent on upgrading transport infrastructure.
Annual expenditures would correspond to 9% of total GDP of the region, the report shows.Evidence from major upgrades to Turkey’s road network demonstrates how improved market access can generate new trade links and expand the variety of products that are available to consumers. The resulting gains in employment can also reduce emigration from previously isolated regions. Transport infrastructure can therefore not only contribute to competitiveness and the integration of markets but also to opening up opportunities for income growth in economically disadvantaged locations, the EBRD added.
According to EBRD data, motorway networks remain limited throughout the EBRD, except for Croatia and Slovenia. The length of motorway per one million inhabitant remains under 100 kilometres in most of these economies.
Infrastructure upgrade needs as a percentage of GDP vary greatly in the 2018-2022 period, and the ratios are typically the lowest in Central and Eastern European EU member states. According to an EBRD chart, the ratio in Hungary is below 10%, while it exceeds 80% in Mongolia.
Despite significant progress since the 1990s, emissions of greenhouse gases across the region are still substantially above those of comparable emerging markets, raising concerns about the long‐term sustainability of economic growth across the EBRD region. Stricter policies, starting with eliminating energy subsidies, are needed to meet the Paris Agreement commitments, the bank added.
