Let’s start with the most important point: an economic indicator measuring business expectations from GKI Economic Research — a think-tank not particularly sympathetic to the Hungarian government — reached a two-year high in October. The last time business expectations were this favorable? All the way back in May 2019, and even then, consumer expectations rose back to their June levels after three months of deterioration.
It wasn’t just GKI to come up with such a favorable forecast — the forecasts of other institutions and banks also show that the Hungarian economy is in great shape, so much so that, on average, we will be in the “leading group” of EU countries in terms of economic growth. In fact, we are expected to expand by more than 7 percent. No obligatory government optimism is necessary here: just do the math.
But what is behind these rosy forecasts?
On the one hand, it is the crisis-resilience and rapid adaptation of the Hungarian economy, and on the other hand, the budgetary stimulus provided by the government is responsible for such a healthy outlook. This year and next, the economic restart action plan will support domestic businesses and families with more than 13,000 billion forints (€36 billion).
Following the decisions made in the world’s major economic centers, growth has accelerated, and momentum will continue in the next period. Serious stimulus programs on both the fiscal and central bank sides strengthened the restart. Of these, it is worth highlighting the programs supporting job retention, as well as the lending scheme to enterprises and the central bank’s guarantee program.
And almost all sectors have contributed to the growth, although there are some sectors that undeniably still have their own problems.
The relaunch of the economy is based on investment: the domestic investment rate is one of the best in the EU, with the number of employees exceeding 4.7 million. There are only nine European countries that have reached pre-crisis levels, and Hungary belongs to this elite group. We can be rightly proud of that. Of course, there are always risks, as there are now, so don’t be fooled. We don’t yet know exactly what the fourth wave of the coronavirus epidemic will bring, nor when we will be able to bring inflation back to normal.
Let’s add that none of the risk factors are country-specific — they affect all economies. Although the left claims that the government has already prepared an election budget for this year and next, the domestic general government deficit can be said to be average in the EU. The government is in fact allowing a higher deficit than in previous years in order to stimulate the economy.
Finally, let us say a few words about EU funds. It is well known that the European Commission has not yet adopted the Hungarian recovery plan, which is why the government has decided to pre-finance it. There is no doubt that EU money has a significant role to play in catching up, as that is the function of the funding. Hungary is at the forefront of the mobilization and use of community funds. In the seven-year cycle completed in 2013, the available framework was practically fully utilized, and we were able to show a similar result in the 2014–2020 cycle. For the time being, there is no risk to the money of the recently launched new seven-year community budget, but Brussels is blocking the resources for this recovery plan.
Let there be no misunderstanding: this will not be the state’s money. It will subsidize businesses and economic sectors that have been wrecked by the recession. If Brussels prevents the transfer of otherwise legitimate funds, it will hurt the Hungarian economy. We hope that the debate over EU funding will subside and that common sense can prevail over political considerations.
In the meantime, we will survive and resort to the old path known as market financing.
