GDP is still the default shorthand for how “the economy” is doing. It is indispensable for tracking output and short-term momentum, but it was never designed to show whether growth is durable, financially stable, or compatible with environmental and social limits. For policymakers, that missing information is not abstract. It affects how budgets are set, how monetary and macroprudential policy are calibrated, and what types of investment are prioritised.
Across Europe, this insight underpins the “Beyond GDP” agenda: not replacing GDP, but complementing it with indicators that capture sustainability, inclusion, and long-term resilience. Once indicators are embedded in governance frameworks, they shape incentives and behaviour.
A clear example is fiscal policy. In the EU, estimates of the output gap feed into the calculation of the structural (cyclically adjusted) budget balance under the Stability and Growth Pact, influencing assessments of whether fiscal policy is expansionary or pro-cyclical. If measurement improves particularly in catching-up economies where potential output is hard to estimate, then the perceived “fiscal space” can change.
Financial stability policy offers another illustration. The credit-to-GDP gap is used internationally as a reference indicator for setting countercyclical capital buffers (CCyB), which affect banks’ capital requirements and credit conditions. In Hungary, the MNB regularly communicates its macroprudential stance and the indicators behind it. The behavioural link is straightforward: when cyclical credit indicators deteriorate, buffers and supervisory pressure can rise, affecting lending conditions even if headline GDP looks strong.
Hungary’s move “beyond GDP” should be read in this context: not as an academic exercise, but as an effort to integrate sustainability considerations into the everyday language of economic policy aligned with evolving EU governance processes.
GDP stays, but dashboards are expanding
The European Commission’s Beyond GDP initiative aims to develop indicators that are transparent and comparable across countries, while extending the analytical frame to environmental sustainability, social inclusion, and intergenerational fairness. The OECD’s well-being framework makes a similar point: GDP measures market output, but not whether living standards are improving or whether current growth undermines future wellbeing.
Some countries have moved early and visibly. New Zealand’s Treasury uses a wellbeing dashboard to structure policy advice and budget priorities. Italy’s statistical office publishes an annual set of equitable and sustainable wellbeing (BES) indicators, explicitly tracking changes over time.
Hungary fits this trend, but with a distinctive feature: it has developed two complementary measurement tracks at once: official statistical sustainability indicators and a central-bank-led framework designed to speak directly to macroeconomic and financial policy debates.
Hungary’s statistical foundation: sustainability as evolving resources
Hungary’s National Framework Strategy on Sustainable Development defines sustainability through four core resources: human, social, natural, and economic. The Hungarian Central Statistical Office (KSH) operationalises this concept with a system of sustainability indicators that are updated regularly and allow comparisons over time.
The policy value of this resource-based approach lies in its emphasis on trends rather than static benchmarks. Some indicators move with the business cycle, while others reveal slower structural developments. Distinguishing between the two matters for policy design. Cyclical improvements may not justify permanent spending commitments, while persistent deterioration in natural capital or stagnation in human capital strengthens the case for long-horizon investment and reform.
The MNB’s role: translating sustainability into macroeconomic terms
Hungary’s central bank has an explicit mandate to engage with sustainability issues. In 2021, Parliament expanded the Magyar Nemzeti Bank’s statutory objectives to include environmental sustainability, linking sustainability concerns to the way monetary and financial stability policy are assessed.
Building on this mandate, the MNB has sought to express sustainability in terms that macroeconomic policymakers routinely use. A detailed treatment is provided by Kandrács and Ritter (2024), who situate sustainable GDP within the broader debate on the limits of GDP and the need for complementary indicators.
Their analysis clarifies that sustainable GDP is not a welfare index or a substitute for GDP, but an adjusted macroeconomic lens. It integrates environmental, social, and financial sustainability conditions into growth assessment in a way that is still compatible with standard macroeconomic reasoning. In practical terms, if growth is driven by overheating, excessive credit expansion, or ecological overuse, sustainable GDP signals that headline GDP can overstate the economy’s true room to manoeuvre, strengthening the case for a more cautious fiscal stance, tighter macroprudential policy, or a reorientation of public and private investment priorities.
What “sustainable GDP” measures and how similar indicators already shape policy
The MNB’s sustainable GDP framework is built around five conditions, each represented by a single, interpretable indicator. This keeps the framework comparable across EU countries and suitable for tracking developments over time.
1) Output gap (cyclical): Captures whether the economy is operating above or below sustainable capacity. Because output gap estimates are used in EU fiscal surveillance, improved measurement can influence assessments of fiscal stance and compliance.
2) Net lending / external balance (structural–cyclical mix): Signals whether growth is compatible with long-run external sustainability. Persistent deficits or surpluses point to vulnerabilities that eventually constrain fiscal and monetary choices.
3) Credit gap (cyclical financial): Measures deviations in private-sector credit-to-GDP from trend. Internationally, this indicator is a reference for CCyB decisions, linking measurement directly to supervisory action. The practical implication is that credit-fuelled booms can be “discounted” in sustainable GDP terms—supporting earlier macroprudential tightening.
4) Employment gap (structural social): Proxied by the employment rate gap between highly and low-educated workers. Persistent gaps show underused human capacity and justify investment in education, training, and labour market inclusion.
5) Ecological balance (structural environmental): Compares biocapacity with ecological footprint, translating ecological overuse into a sustainability deduction. Deterioration over time signals that current growth is eroding natural capital, strengthening the case for green investment and regulatory reform.
Taken together, these indicators help distinguish cyclical pressures from structural sustainability challenges, supporting more targeted policy responses.
- Fiscal policy: Output gap estimates feed into structural budget balance calculations under EU fiscal surveillance, shaping perceived fiscal space.
- Macroprudential policy: Credit-to-GDP gaps guide CCyB settings, affecting banks’ capital requirements and lending conditions.
- EU governance: The European Semester and NECP reporting cycles reinforce monitoring of climate, energy, and resilience indicators.
- Investment decisions: Sustainable finance rules (taxonomy and sustainability reporting) increasingly influence what counts as “sustainable” for investors.
Hungary in the EU governance context
Hungary’s sustainability indicators are not standalone. The European Semester increasingly frames economic coordination around sustainable and inclusive growth, while EU climate governance requires Member States to submit and update National Energy and Climate Plans (NECPs) and report progress using comparable indicators.
This matters because EU governance processes translate measurement into incentives: peer comparison, policy recommendations, and, in few cases, funding priorities. Sustainability metrics become harder to ignore when they are part of recurring EU cycles rather than one-off publications.
Policy takeaway: measurement is a policy lever
The main challenge of Beyond GDP is not producing indicators but embedding them in decisions. Hungary’s emerging model points to a pragmatic division of labour: official statistics provide a stable public baseline, while central-bank-led indicators translate sustainability concerns into macroeconomic and financial policy language.
If these measures become routine inputs into forecasting, budget planning, and financial stability assessments, they can shift behaviour in a predictable way: less emphasis on short-run GDP gains that coincide with overheating, credit excess, or ecological depletion and more emphasis on investments that strengthen long-term capacity (skills, energy efficiency, clean infrastructure, resilience). That shift aligns with the direction of EU governance and funding debates, and it is increasingly relevant for Hungary as it navigates competitiveness, energy security, and climate transition pressures in the second half of the 2020s.
References
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European Commission. (2019). Vade Mecum on the Stability and Growth Pact – 2019 edition. https://economy-finance.ec.europa.eu/system/files/2019-04/ip101_en.pdf
European Commission. (2020). Annual Sustainable Growth Strategy 2021. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52020DC0575
European Commission. (2023). Beyond GDP: Delivering sustainable and inclusive wellbeing. https://joint-research-centre.ec.europa.eu/projects-and-activities/beyond-gdp-delivering-sustainable-and-inclusive-wellbeing_en
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Kandrács, C., & Ritter, R. (2024). Sustainability indicators – the boundaries and alternatives of GDP. Financial and Economic Review, 23(2), 31–55. https://doi.org/10.33893/FER.23.2.31
Magyar Nemzeti Bank. (2021). Parliament gives MNB sustainability mandate. https://www.mnb.hu/en/pressroom/press-releases/press-releases-2021/parliament-gives-mnb-sustainability-mandate
Magyar Nemzeti Bank. (2023). Macroprudential policy. https://www.mnb.hu/en/financial-stability/macroprudential-policy
OECD. (n.d.). Well-being and beyond GDP. https://www.oecd.org/en/topics/policy-issues/well-being-and-beyond-gdp.html
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