By Tamás Pesuth, Head of Economic Research, Nézőpont Institute
“Hungary is a small country, but it looms larger on investors’ screens.” So the Financial Times wrote at the beginning of February this year, while calling the governor of the National Bank of Hungary (MNB) “a maverick.”
As György Matolcsy marked his first year in office today, a more rounded appraisal of his work is required. The FT article looked mainly at the forint exchange rate and the low base rate in reaching its “maverick” judgement. Continue reading »
Predicting what the Hungarian central bank is going to do is becoming something of a fools game. Last month, the bank cut rates for the 18th time in a row. So far, so predictable – except the bank changed from 20 basis point cuts (as it had used five times previously) to 15bp.
On Tuesday, the bank cut again – a 19th consecutive cut – but confounded most analysts who had predicted that the weakened currency would give the MPC reason to reduce by a smaller margin. No chance – the bank stuck to its new 15bp reduction, dropping rates from 2.85 per cent to 2.7 per cent. Where will it end? Continue reading »
The markets just aren’t reading the script, it seems. On Thursday the Hungarian economy ministry issued its latest upbeat economic release: “The number of people in work exceeds 4m” – that’s 235,000 more in work than when the Fidesz government took over in 2010, it announced in triumph. Minister Mihaly Varga was equally upbeat in a guest post on beyondbrics this week.
So if Hungary is in such good shape, how come the forint has been so badly hit? Continue reading »
By Attila Mesterhazy of the Hungarian Socialist Party
At the WEF in Davos, the renowned economist Kenneth Rogoff had encouraging words for Europe’s leaders: he argued that high levels of education, strong innovative capabilities and the rule of law provide the old continent with a solid, long-term basis for development.
In Hungary, unfortunately, it is these very values and traditions which Prime Minister Viktor Orban has most undermined in his disastrous rule of the past three and a half years. Continue reading »
The Hungarian forint set off on a roller coaster ride on Wednesday, buoyed at first by optimism and then buffeted by a sell-off across emerging market currencies, exacerbated by dovish signals from policy makers at home. The forint fell to as much as Ft310 to the euro, its weakest level in more than a year and a drop of 2.1 per cent from Tuesday’s close of Ft303.6. Continue reading »
Mihaly Varga, Hungary’s economy minister, may champion a recent turnaround in his country’s economy and the unorthodox methods he argues have achieved it. But coincident with his guest post on beyondbrics on Monday, the OECD released its latest report on Hungary.
It warns that Hungary will struggle to achieve anything beyond “meagre” economic growth unless it addresses a long list of issues, including the creation of a more predictable tax and business environment, stronger, more effective and even-handed treatment by regulators and competition agencies, and support for the banking sector to lend at commercially competitive rates. Continue reading »
By Mihaly Varga, Hungary’s Minister for National Economy
“Facts are stubborn things.” This quote, attributed to John Adams, the second president of the United States, has become, in practice, a proverb in Hungary: so I too will rely principally on the facts.
The Hungarian economy was particularly hard hit by the global economic and financial crisis of 2008-09. Hungary was particularly vulnerable because of a fatal combination of the credit-based economic policy practised throughout the previous decade – which continuously increased both external and internal debt – and the economy’s weak growth potential and low employment levels.
But Hungary has proved it is able to recover and stand on its own two feet. Continue reading »
Hungary’s central bank made it 17 out of 17 on Tuesday when it trimmed its policy interest rate by 20 basis points to 3 per cent, completing a 4 percentage point reduction since the bank began cutting in August 2012.
There may still be more cuts to come. Continue reading »
With a restrained grin, Mihaly Varga, Hungary’s economy minister, pressed the button to open trading at the Budapest Stock Exchange (BSE) on Friday – simultaneously inaugurating the Xetra trading system for the first time in the Hungarian capital. Continue reading »
As expected by the markets, Hungary’s central bank cut the base rate from 3.4 per cent to 3.2 per cent on Tuesday – the sixteenth consecutive monthly cut since the process began in August 2012.
The Hungarian forint depreciated slightly on the news, climbing a fraction to 298.48 to the euro in afternoon trading. Continue reading »
If Hungarian bankers – already facing another year of heavy losses – thought things could not get worse, they just have.
Only days after Karl Sevelda, chief executive of Raiffeisen Bank International, more than hinted he was prepared to withdraw from some central European countries, including Hungary, due to the unfavorable business climate, the competition office in Budapest on Wednesday announced fines on 11 commercial banks totaling Ft 9.5bn (€32m). Continue reading »
By Gordon Bajnai, former prime minister of Hungary
In a recent radio interview Viktor Orban, Hungary’s prime minister, made a surprising confession. While speculating about the nature of the Hungarian electorate, he stated: “Hope is more important to Hungarian voters than fact.”
As he runs for re-election soon, is this his moment of truth? Is the one-time liberal, anti-communist dissident admitting that he is hoping that voters will decide based on hopes, rather than facts? Because the facts – most especially the economic facts – of the past three and a half years are not on Orban’s side. Continue reading »
Hungary’s central bank once again cut the base rate on Tuesday – for the fifteenth consecutive month – trimming 20 basis points off the previous figure to bring the key rate down to another record low of 3.40 per cent.
That means Hungary has, slice by slice, capitalised on its improving inflation figures and the benign global climate to more than halve the base rate from August last year, when it stood at 7.00 per cent. Continue reading »
Vistors to downtown Budapest – teeming with tourists in these summer months – may be surprised by the number of forlorn shops, their fronts closed and shuttered, awaiting new tenants. Yet despite such evidence of a prolonged retail downturn, the Hungarian economy can still show the world a thing or two says Viktor Orban, the country’s pugnacious prime minister: not least that it has brought its budget deficit down below 3 per cent of GDP, and cut inflation to record lows.
Whether these achievements are sustainable is another matter. But government officials repeat the positive elements of the story, and the markets seem to believe it. Continue reading »
That'll cost you
Despite the Hungarian government trumpeting a turnaround in the economy of late and low budget deficit figures of the past two years, Mihaly Varga, the new pragmatic finance minister, seems to believe discretion is the better part of valour: with tax revenues looking somewhat anaemic this year, he announced a mini-package of tax increases on Monday to keep the deficit on track. Continue reading »