On 1 August 2018 the IMF published its report following consultations with Hungary under Article IV of the IMF’s articles of agreement.

Hungary’s economy has been growing strongly for some years supported by EU funds and strong disposable income. Economic growth is expected to be around 4% in 2018 at a similar level to the previous year. In 2019, growth will begin to decelerate. Improved productivity through structural reforms is essential for achieving higher living standards.

Revenue collection would be increased by phasing out the remaining sectoral taxes, broadening the tax base and further enhancing tax administration and this would also reduce distortions in the economy. The existing property taxes should be reformed and a modern real estate tax should be created to help local governments raise additional revenue.

The IMF report welcomed the establishment of the Competitiveness Council and the implementation of some of its recommendations to improve the business environment. Further progress is also required in relation to obtaining construction permits and electricity connection, ease of paying taxes, and perceived corruption. The creation of a level playing field for all investors, including small and medium enterprises (SMEs) and foreign direct investment (FDI) by reducing administrative red tape and simplifying the regulatory environment would help to broaden the base for economic growth and exports. There is also an urgent need to improve education and vocational training to address skills mismatches and increase labour market participation especially by women.