‘It is essential for Hungary to increase the efficiency of investment in R&D, education and healthcare to ensure a higher level of development for the country’ – it was the message delivered at an online conference organised by the Labour Section of the Hungarian Economic Association on Thursday in Budapest.

Speakers of the ‘Middle Income Trap’ event: Magdolna Csath, Professor of the National University of Public Service, Member of the National Competitiveness Council; Éva Palócz, CEO of Kopint Tárki Zrt., Vice President of the HEA; and György Boda, Managing Partner of Boda & Partners Kft., Board Member of the Labour Section of the HEA. The event was moderated by László Herczog, former Minister of Labour and Social Affairs, Economist of Pénzügykutató Zrt., Board Member of the Labour Section of the HEA.

The presentations of Magdolna Csath and Éva Palócz can be accessed at the HEA podcast channel.

‘Hungary should change its economic development model, which requires knowledge-based jobs, among others’, Magdolna Csath told the audience She discussed the development of Brazil and South Korea from 1960 to 2014 based on the research of two World Bank economists analysing the development of each country based on GDP per capita figures.

The studies revealed that while Brazil preferred foreign capital investment, South Korea changed its growth model and invested huge amounts in R&D and education instead. As a result, South Korea’s per capita R&D spending increased from 578 to 1.279 euros between 2010 and 2018. In the Asian country the ratio of higher education participants reached 6.1 percent, as opposed to 2.2 percent in Hungary.

Professor Csath emphasized the distorting effect of the GDP indicator as it also includes repatriated profits: the more foreign investors in a country, the likelier it is to repatriate profits to their home countries. For example, based on Central Statistical Office figures the foreign companies removed HUF 3,000 billion from Hungary in 2019.

Éva Palócz, CEO of Kopint Tárki Zrt., Vice President of the HEA highlighted that in Hungary only the foreign companies are able to achieve productivity levels above the national economy average and provide higher than average wages. She added that despite Hungary’s substantial spending on education as a percentage of GDP, the PISA test results showed that in mathematics, natural sciences and reading comprehension Hungary could only beat Estonia and Slovakia within the region. Therefore increasing the efficiency of education would be justifiable. (MTI)


Related documents:
Presentation by György Boda (pdf)
Presentation by Magdolna Csath (pdf)
Presentation by Éva Palócz (pdf)