beyondbrics

As Hungarian markets closed on Monday, investors were taking stock of the damage wrought by the government’s weekend failure to conclude budgetary talks with the IMF and EU. The forint lost more than 3 per cent against the euro and Hungarian blue chip stocks shed some 2.9 per cent – a predictable bashing but not quite a catastrophe.

Hungary’s ever self-confident prime minister Viktor Orban might reflect that things could have been worse.

Without an IMF-safety net for the next few months and given current market jitters about high public debts, the sell-off could have become a self-fulfilling rout.

But some might reflect that this is ultimately a matter of perspective.

When Orban took power he inherited an IMF-EU standby agreement that was the toast of the international community.  Now it is in tatters.

Blessed with an unprecedented two-thirds parliamentary majority, he could have taken decisive action – instead the IMF and EU packed their bags, despairing of a lack of well thought-out structural reforms and criticising the government’s one bold measure — a HUF200bn bank tax that is likely to hamper growth.

And having widely anticipated a business-friendly government, financial markets have also suffered a cold dose of reality.

Since hitting a peak on April 7, four days before Orban’s landslide election victory, the BUX has lost some 13.7 per cent. Meanwhile, the forint has weakened by 13.4 per cent against the Swiss Franc, increasing the repayment costs of the legions of Hungarians who hold foreign currency mortgages and other consumer loans.

Hungary may have escaped for now. But if the mercurial Orban is just a little less cocksure this evening, that might not be such a bad thing.