The political situation in Hungary is still the biggest obstacle in the way of economic development, the Hungarian European Business Council (HEBC) writes in its latest annual report. The document, which can be downloaded in pdf format from here, seriously criticizes Hungary's economic policy, pointing out that government measures are highly unpredictable on the long run, while investors like risks in business life and not in the business environment.

According to a summary of the report on index.hu, the HEBC - the local business council of the Brussels European Round Table of Industrialists (ERT) - thinks the country is over-politicized, reforms have failed, the tax system is too complicated and there is far too much bureaucracy. Moreover, there are problems with education and corruption, there is a lack of social consensus and the convergence program is suffocating the economy.

Among the biggest problems facing Hungary is a very high rate of redistribution by the state, which leads many business players to focus on public contracts. The report says that the country needs a long-term strategy, more predictability, better planning, a paring of the state debt and budget deficit and a new education strategy if it wants to lead in the region's economic rankings, where it is currently near the bottom.

János Takács, chairman of the council, told Gazdasági Rádió that the country also suffers from a lack of trained professionals. The EHBC thinks Hungary's ability to attract capital and thus its competitiveness would be greatly enhanced if professional training was more emphasized, which is why the council thinks reforms in education should be a priority.

Meanwhile, the latest report by market research institute GKI said Hungary's competitiveness index improved by 1.6 percentage points in the first quarter, in part due to decreasing labor costs, meaning that the country has reached the average in the region. However, it improved by as much as seven percentage points in Romania over the same period.

In Hungary, the business environment index decreased considerably at the same time, nearing the 2006 low point, as did the partial index measuring the predictability of state behavior, as a result of the referendum and the minority government. In addition, more people think the business environment has become riskier.