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By 2027, Hungary can reach the level of the most advanced countries

Credit insurance companies Euler Hermes and Allianz Research are the latest in their economic forecast They have studied how the pandemic affects global well-being inequalities and, within that, when Hungary reaches the income level of most developed countries.

The analysis came as the first surprising finding that the wealth gap between rich and poor countries has narrowed in the short term, as the negative economic effects of the pandemic in 2020 mainly hit developed countries. However, longer-term models have led to a very different picture: the welfare gap may widen further in the medium to long term, as developing countries have fewer tools to mitigate negative economic impacts and slower population growth.

In the new economic environment after the epidemic, cheap labor will not be a priority for investors, so emerging countries may lose their main economic attractiveness, which has so far contributed significantly to strengthening the middle class in these societies. In addition, these countries are at risk of indebtedness.

Prospects for Hungary and the region

Depending on the classification used by economists, we distinguish between low, middle, high and middle income countries. A country falls into the latter group, the most advanced when its per capita national income, measured in purchasing power parity (PPP), reaches 50 percent of the calculated income in the United States. Accordingly, the Czech Republic, Slovenia and then Estonia were the first ex-European socialist countries to achieve high levels of income. Lithuania followed suit in 2018 and Poland in 2019.

In Hungary, strong economic growth that started in 2016 has accelerated the catch-up, and based on historical models, we would have reached a high income level by 2025. But the epidemic has intervened, and as a result, the catch-up is two years late, so it is expected that The per capita national income in 2027 reaches a level beyond which Hungary can be classified as one of the most developed and high-income countries. Countries.

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The situation was similar in Latvia and Romania. It is expected to be the first in the group of high-income countries by 2022 and the last by 2026. But the pandemic has caused a setback in both countries, so Latvia could reach a high income level in 2025 and Romania at the same time as Hungary in 2027.

The analysis also showed that in the case of Hungary, EU membership is clearly the factor contributing to the relatively rapid normalization after the pandemic. Researchers have identified several non-EU countries where catch-up is slowing dramatically, with Russia and Turkey being the two most important countries.

Globalization does not spread

Global trade is also undergoing a fundamental change, according to the authors of the analysis: on the one hand, because aspects of sustainability are becoming more important, and on the other hand, flexibility is being replaced by flexibility as a key aspect, and global supply chains are changing. Although analysts say that the shortening of supply chains – that is, “resubsidization, rounding off support” for suppliers, production – will not be a significant trend, the process of globalization in world trade will stop, and globalization is not. spread in the global economy.

Experts anticipate the most significant change in the field of digitization. The use of artificial intelligence and robotics and the spread of the data-driven economy have reached a level where they can completely transform the world of work. As a result, labor costs are becoming less important, which can lead to widening inequalities in global well-being. Climate protection and the emergence of green aspects can primarily help the economies of developed countries. Analysts say a significant amount of investment is expected in sectors of the green economy, driven by a shift in consumption patterns primarily in high-income countries. Consumers increasingly prefer domestic producers, and the circular economy and sharing economy model is gaining strength. In addition, trade disputes between individual countries may persist, and the popularity of economic protectionism appears to have not waned – and both trends began before the pandemic.

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All these factors negatively affect emerging economies. While the per capita income has increased significantly in many developing countries in recent decades due to globalization, the rise, and the attainment of high income status, has been delayed in these countries.