The country-specific recommendations are documents prepared by the European Commission for each Member State, which analyse its economic situation and provide tailored policy advice on measures that it should adopt over the coming 18 months. They cover the particular challenges that the Member State is facing in a broad range of areas: the state of public finances, reforms of pension systems, measures to create jobs and to fight unemployment, education and innovation challenges, efficiency of the public administration, competition etc. The final adoption of country-specific recommendations prepared by the Commission takes place at the highest level by national leaders in the European Council.
Hungary emerged from recession to grow moderately in 2013, with domestic demand being the main driver of the economy. Unemployment decreased mainly on account of an extension of the Public Work Scheme. As highlighted in the 2014 in-depth review presented by the Commission on 5 March 2014, Hungary was identified as experiencing macroeconomic imbalances that require monitoring and decisive policy action. In particular, the net international investment position, the high level of public and private debt in the context of a fragile financial sector and deteriorating export performance deserve close attention.
Overall, Hungary has made limited progress in addressing the 2013 country-specific recommendations. There has been some progress in enhancing the fiscal governance framework and increasing tax compliance. The government has addressed the recommendation on strengthening the judicial system and made steps to reduce the administrative burden. Improvements have also been made to encourage the participation of women in the labour market, through extended child care facilities and regulatory amendments to facilitate the return to work after parental leave.
However, Hungary still faces serious challenges in the short to medium term, but its policy plans for 2014 do not go far enough in some areas to address them. These challenges are related to the reduction of public debt, changes in the tax system and the regulatory environment to support businesses and to reduce the high labour tax wedge, a return to normal lending in the financial sector, measures to facilitate access to education and the labour market as well as a strategy to reduce poverty, and reforms in energy and transport. See how Hungary compares with other EU Member States in key areas.
2014 European Commission's recommendations in brief
The Commission has issued seven country specific recommendations to Hungary to help it improve its economic performance. These are in the areas of: public finances and the fiscal framework; taxation; financial sector; labour market and social inclusion; business environment; education and training; network industries.