The economic policy of the Hungarian government received backing from an unexpected source. László Csaba is a prominent liberal economist, member of the Hungarian Academy of Sciences, and professor of the Central European University established by George Soros, and he said he largely approved of the measures in an interview with financial news portal novekedes.hu.
“I agree with the Finance Ministry’s position that actions against the crisis should rather be funded from regrouping resources rather than additional spending,” Csaba said. “In summary, my view is that the government is pursuing a policy of [economic] stimulus.”
His only tangible criticism of the government’s economic policies in the face of the coronavirus pandemic was that instead of three months of unemployment money support for those who have lost their positions, nine-months of support would have been preferable. He added that contrary to the European Commission’s latest economic forecast, which sees a seven percent drop in the Hungarian GDP, the decline will be more around five percent.
“The Commission, as usual, is behind the events. Although we are in July, the sentiment of the economic forecast corresponds to what was in April or May,” he said. “If you look at this year, it is clear that a sizeable decline is expected in the United Kingdom, France and Germany. In the Central European region, the decline will be much less.”
He added that in light of the fresh economic data, the situation of the Hungarian economy is rather promising.
“We will also experience a fall, but it will not be a dramatic one,” Csaba said. “It is already visible that the indicators for the first two quarters are not that bad and the services sector is recovering much faster than we previously thought. Lacking additional data, I can also say that it is also visible that the healthcare sector is also returning to its normal self.”
Csaba said that unlike the National Bank of Hungary, which expects a V-shaped economic recovery, he believes it will be probably U-shaped.
“I rather expect a U-shaped recovery in the region, with a smaller decline and slower recovery, resulting from the fact that a series of [economic] activities cannot be resumed, as the crisis has decimated those lacking capital and those on the brink.”
Csaba said the government has come up with a “fairly dynamic economic incentive plan”, whose only drawback is that in the first five months of the year the budget deficit was much higher than projected.
“But there’s no problem with that, even the Union’s regulations leave room for a laxer budget in case of economic decline.”
He said the EU’s seven percent economic decline and budget deficit forecast for Hungary this year was overly pessimistic, with his own forecast at or just above five percent, coupled with a peak jobless rate no worse than six or seven percent.
Title image: Economics professor László Csaba. (MTI/Tamás Kovács)