Some of the Most Tenacious Critics Now Acknowledging Economy’s Turnaround
We have more encouraging news about Hungary’s economy, once hard-hit by the financial crisis but now turning to steady GDP growth, growth that puts Hungary among the EU’s leading economies. I review regularly on this blog the coverage we’re seeing, and if the March news was about all the reports of positive economic indicators, April was about some of Hungary’s most tenacious critics finally acknowledging the economy’s turnaround.
“The performance of Hungary is astonishing and the fact that Orbán achieved these results despite the criticism of the EU, IMF and other financial institutions is even more astonishing,” said Neil Shearing, an analyst at the London-based Capital Economics, commenting on Hungary’s recent economic results for Polish newspaper Rzeczpospolita [Hungarian summary here].
The article mentions that the Orbán Government inherited a “country in ruins” from the Socialists and that the country’s default had become a real possibility. But today, according to the author, Hungary is showing “one of the best results in a Europe struggling to overcome the crisis” as Standard & Poor’s moved the country’s long-term GDP growth forecast up from 2 to 2.5 percent.
London’s financial analysts noticed early the country’s recovery. It was London that first predicted — contrary to a number of significant international financial institutions — a significant economic growth for Hungary in 2014. The London analysts were right. But April brought a change in tone among Hungary’s former critics as well.
The IMF released a report this month acknowledging Hungary’s robust economic growth that put us back to the pre-crisis level of GDP, rapid decline in unemployment, and successful measures for creating external and internal balance and reducing the economy’s vulnerability.
The Financial Times — typically quite critical of Hungary — just published an article about that very topic, the effort to reduce exposure. According to FT, Hungarian “households are the envy of regional neighbors” because the foreign currency loans have been converted into the local currency, the forint. That was a tough, multiple-step process over the last five years — for which the government took a great deal of criticism — but it dramatically reduced the debt burden on families and made the economy much less vulnerable.
According to FT, that’s one of the most import factors behind the recent rally at the Budapest Stock Exchange, comparable only to Shanghai’s, with a 30 percent rise year-to-date.
Continuing the positive trends, the Hungarian unemployment rate continues to fall, remaining under the EU average now for two years, and Hungary’s trade surplus has continued to show positive balance. All this upbeat news allowed Hungary’s Central Bank to cut the base rate again in April, making financing cheaper and allowing the Hungarian government to cautiously raise the prognosis for GDP growth for 2015 to 3.1 percent.
Future economic goals for the government remain the further reduction of the country’s debt-to-GDP ratio and measures that bolster stability — like the early adoption of the 2016 budget and the agreement with the EBRD.