{"id":19172,"date":"2024-08-20T09:58:45","date_gmt":"2024-08-20T09:58:45","guid":{"rendered":"https:\/\/reinvantage-dev.eonserver.com\/?p=19172"},"modified":"2024-08-20T09:58:45","modified_gmt":"2024-08-20T09:58:45","slug":"economy-in-focus-hungary-2","status":"publish","type":"post","link":"https:\/\/reinvantage-dev.eonserver.com\/?p=19172","title":{"rendered":"Economy in focus: Hungary"},"content":{"rendered":"\n<p><strong>With his country\u2019s economy in such a precarious state, Viktor Orb\u00e1n\u2019s political grandstanding increasingly looks like a vanity project Hungary can ill afford.&nbsp;<\/strong><\/p>\n\n\n\n<p>Standing on Budapest\u2019s Fisherman\u2019s Bastion looking towards Hungary\u2019s magnificent parliament building, there are no signs at all that the country\u2019s economy is currently on a rollercoaster ride and that ordinary Hungarians are feeling the pinch.&nbsp;<\/p>\n\n\n\n<p>Restaurants, bars and <em>s\u00f6r\u00f6z\u0151\u00e9i <\/em>do good business, well-heeled tourists come and go through the revolving doors of the nearby Hilton hotel. The August sun shines, all looks well.&nbsp;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-text-color has-background has-cyan-bluish-gray-background-color has-cyan-bluish-gray-color is-style-wide\"\/>\n\n\n\n<ul class=\"wp-block-list\"><li><a href=\"https:\/\/emerging-europe.com\/news\/budapest-eyes-an-opportunity-to-create-cees-first-mega-airport\/\">Budapest eyes an opportunity to create CEE\u2019s first \u2018mega\u2019 airport<\/a><\/li><li><a href=\"https:\/\/emerging-europe.com\/news\/is-the-eu-finally-losing-its-patience-with-hungary\/\">Is the EU finally losing its patience with Hungary?<\/a><\/li><li><a href=\"https:\/\/emerging-europe.com\/after-hours\/discover-hungary-in-five-compelling-reads\/\">Discover Hungary in five compelling reads<\/a><\/li><\/ul>\n\n\n\n<hr class=\"wp-block-separator has-text-color has-background has-cyan-bluish-gray-background-color has-cyan-bluish-gray-color is-style-wide\"\/>\n\n\n\n<p>But in supermarkets, prices continue to rise. Food costs surged in July after the government ended mandatory discounts on basic staples.<\/p>\n\n\n\n<p>As the cost of living continues to rise, straining household budgets, the government\u2019s policy responses in the coming months will be critical in shaping the country\u2019s economic future, with a focus on maintaining stability, encouraging investment, and ensuring that the benefits of the modest recovery\u2014if maintained\u2014are broadly shared across society.&nbsp;<\/p>\n\n\n\n<p>And it\u2019s a big \u2018if\u2019. Growth has recovered a little following a fall in GDP of 0.9 per cent in 2023, but the Hungarian economy disappointed in the second quarter of 2024, contracting by 0.2 per cent quarter-on-quarter following a 0.8 per cent expansion in the first three months of the year.<\/p>\n\n\n\n<p>\u201cThe contraction marks a continuation of the seesaw pattern of growth that Hungary has been experiencing in recent quarters,\u201d <a href=\"https:\/\/www.fitchsolutions.com\/bmi\/country-risk\/central-and-eastern-european-economic-growth-improve-h2-2024-following-mixed-q2-2024-outturn-14-08-2024?\" target=\"_blank\" rel=\"noreferrer noopener\">according to Fitch<\/a>, a ratings agency.&nbsp;<\/p>\n\n\n\n<p>\u201cRetail sales and consumer confidence data suggest that private consumption will struggle to recover in the near-term,\u201d Fitch continues. &nbsp;<\/p>\n\n\n\n<p>The continuation of the alternating pattern rather than a return to a more sustained pace of growth has therefore prompted the agency to revise its 2024 forecast down from 2.1 per cent to 1.9 per cent.&nbsp;<\/p>\n\n\n\n<p>ING, a bank, meanwhile suggests that inflation remains an issue, warning that, \u201cthe headline rate [is expected] to creep back above five per cent by December\u201d. In July, consumer prices rose an annual 4.1 per cent compared with 3.7 per cent in June, according to the country\u2019s national statistics office.&nbsp;<\/p>\n\n\n\n<p>Hungary currently has the EU\u2019s highest interest rates, of 6.75 per cent.&nbsp;<\/p>\n\n\n\n<h5 class=\"wp-block-heading\">FDI<\/h5>\n\n\n\n<p>Hungary\u2019s central European location and high-quality infrastructure have long made it an attractive destination for foreign direct investment (FDI), something that Hungary\u2019s government has long touted as evidence that its eternal disputes with Brussels have not deterred foreign investors. &nbsp;<\/p>\n\n\n\n<p>However, there is increasing concern among investors at the Hungarian government\u2019s promotion of domestic ownership at the expense of foreign investors in the banking, media, energy, retail, utilities, telecommunications, and insurance sectors.&nbsp;<\/p>\n\n\n\n<p>According to the International Monetary Fund (IMF), direct FDI in Hungary fell sharply in 2023, to 3.66 billion US dollars (its lowest level since 2019). For 2022, the figure was over 14 billion US dollars.&nbsp;<\/p>\n\n\n\n<p>In June, Ferenc Liszt International Airport in Budapest was returned to majority state ownership for the first time since 2005 when Corvinus, an investment fund owned and managed by the Hungarian state, took an 80 per cent stake, with French infrastructure giant Vinci Airports acquiring the remaining 20 per cent and becoming the airport\u2019s operator. &nbsp;<\/p>\n\n\n\n<p>The purchase, said Hungarian Prime Minister Viktor Orb\u00e1n, corrected an \u201cunforgiveable mistake\u201d, referring to the sale of the airport by Hungary\u2019s then Socialist government in 2005. &nbsp;<\/p>\n\n\n\n<p>Orb\u00e1n has long sought to bring key pieces of Hungarian infrastructure, as well as strategic business sectors, under government control, bucking the trend of other countries in emerging Europe which have broadly sought to sell off remaining state assets. Hungary has instead taken over energy and utilities firms, part of the banking sector, and telecommunications. &nbsp;<\/p>\n\n\n\n<p>At times, these takeovers have been hostile. \u201cForeign investors\u2014the backbone of the Hungarian economy\u2014face strong pressure to sell to Hungarian companies linked to those oligarchs,\u201d <a href=\"https:\/\/bti-project.org\/en\/reports\/country-dashboard\/HUN\">noted<\/a> BertelsmannStiftung, a German think tank, in its latest, 2024, review of the Hungarian economy. \u201cIf they refuse, they are likely to face extraordinary tax authority scrutiny and audit measures.\u201d&nbsp;<\/p>\n\n\n\n<h5 class=\"wp-block-heading\">Little room for manoeuvre&nbsp;<\/h5>\n\n\n\n<p>One of the key challenges for the Hungarian government moving forward will be balancing fiscal discipline with the need to support growth and social welfare. &nbsp;<\/p>\n\n\n\n<p>The government\u2019s ability to maintain public investments, particularly in infrastructure and education, will be crucial for long-term economic resilience. Moreover, structural reforms aimed at improving productivity and labor market participation are necessary to ensure sustainable growth.&nbsp;<\/p>\n\n\n\n<p>Unfortunately, there\u2019s little room for manoeuvre. The budget deficit rose to 6.7 per cent of GDP in 2023, up from 6.2 per cent in 2022. &nbsp;<\/p>\n\n\n\n<p>\u201cThe large budget slippage can be attributed to the underperformance of revenue, reflecting weaker-than-expected economic performance, and to expenditure overruns, in particular on interest, pensions and public wages,\u201d suggested the European Commission in its <a href=\"https:\/\/economy-finance.ec.europa.eu\/economic-surveillance-eu-economies\/hungary\/economic-forecast-hungary_en\" target=\"_blank\" rel=\"noreferrer noopener\">latest<\/a> economic forecast for Hungary.&nbsp;<\/p>\n\n\n\n<p>In 2024, the deficit is forecast to decrease to 5.4 per cent of GDP, driven by the recovering economy and by lower projected subsidies to utility companies to cover their losses from regulated energy prices.&nbsp;<\/p>\n\n\n\n<p>Capital expenditure is projected to remain subdued in line with some announced postponements in nationally financed public investments.&nbsp;<\/p>\n\n\n\n<h5 class=\"wp-block-heading\">A vanity project Hungary can ill afford&nbsp;<\/h5>\n\n\n\n<p>In December 2023, the EU unblocked 10.2 billion euros of cohesion funding for Hungary after Budapest made some reforms to its judicial system, but further relief from Brussles is unlikely.&nbsp;<\/p>\n\n\n\n<p>The EU continues to suspend 11.7 billion euros worth of funds budgeted for Hungary amid concerns over the rule of law, the rights of civil society organisations, academic and media freedom, and the rights of migrants and asylum seekers and of the LGBT+ community.&nbsp;<\/p>\n\n\n\n<p>The money was frozen in December 2022, &nbsp;<\/p>\n\n\n\n<p>In addition, Hungary is still unable to access its Covid-19 recovery and resilience funding, worth 10.4 billion euros in grants and low-interest loans. &nbsp;<\/p>\n\n\n\n<p>So far, just 920 million euros has&nbsp;been paid out in &#8220;pre-financing&#8221; to provide liquidity for certain energy projects.&nbsp;<\/p>\n\n\n\n<p>Budapest currently holds the rotating, agenda-setting six-month presidency of the Council of the European Union but has so far done little except further alienate its European partners.&nbsp;<\/p>\n\n\n\n<p>Just days after taking over the presidency on July 1,&nbsp;Orb\u00e1n&nbsp;made high profile visits to Moscow and Beijing, meeting both Vladimir Putin and Xi Jinping.&nbsp;<\/p>\n\n\n\n<p>While Orb\u00e1n\u2019s overtures to Russia and China might be driven by a desire to carve out a more autonomous path for Hungary, by aligning more closely with Moscow and Beijing, Hungary risks alienating its Western allies, which could lead to a further reduction in financial support from the EU.<\/p>\n\n\n\n<p>This is particularly concerning given Hungary\u2019s economic reliance on EU markets\u2014over 70 per cent of Hungary\u2019s exports go to the EU, and a significant portion of its GDP is tied to EU trade.\u00a0<\/p>\n\n\n\n<p>With his country\u2019s economy in such a precarious state, Orb\u00e1n\u2019s political grandstanding increasingly looks like a vanity project Hungary can ill afford.&nbsp;<\/p>\n\n\n\n<hr class=\"wp-block-separator has-text-color has-background has-cyan-bluish-gray-background-color has-cyan-bluish-gray-color is-style-wide\"\/>\n\n\n\n<p><strong>Unlike many news and information platforms,&nbsp;<em>Emerging Europe<\/em>&nbsp;is free to read, and always will be.&nbsp;There is no paywall here.&nbsp;We are independent,&nbsp;not affiliated with nor representing any political party or business&nbsp;organisation.&nbsp;We want the very best for emerging Europe, nothing more, nothing less. Your support will help us continue to spread the word about this amazing region.<\/strong><\/p>\n\n\n\n<p><strong>You can contribute&nbsp;<a rel=\"noreferrer noopener\" href=\"https:\/\/emergingeurope.krtra.com\/t\/NlQnFuOA2C9c\" target=\"_blank\">here<\/a>. Thank you.<\/strong><\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><a href=\"https:\/\/emergingeurope.krtra.com\/t\/NlQnFuOA2C9c\"><img decoding=\"async\" src=\"https:\/\/emerging-europe.com\/wp-content\/uploads\/2020\/04\/copy-of-add-a-heading.png\" alt=\"emerging europe support independent journalism\" class=\"wp-image-50811\"\/><\/a><\/figure><\/div>\n\n\n\n<hr class=\"wp-block-separator has-text-color has-background has-cyan-bluish-gray-background-color has-cyan-bluish-gray-color is-style-wide\"\/>\n","protected":false},"excerpt":{"rendered":"<p>With his country\u2019s economy in such a precarious state, Viktor Orb\u00e1n\u2019s political grandstanding increasingly looks like a vanity project Hungary can ill afford.&nbsp; Standing on Budapest\u2019s<span class=\"excerpt-hellip\"> [\u2026]<\/span><\/p>\n","protected":false},"author":1,"featured_media":19173,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[6594,6674,21,6608,6633,6320,356,7744,6603,6664],"class_list":["post-19172","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-analysis","tag-budapest","tag-china","tag-economy-politics","tag-economy-in-focus","tag-european-union","tag-featured","tag-hungary","tag-investment-in-hungary","tag-russia","tag-viktor-orban"],"_links":{"self":[{"href":"https:\/\/reinvantage-dev.eonserver.com\/index.php?rest_route=\/wp\/v2\/posts\/19172","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/reinvantage-dev.eonserver.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/reinvantage-dev.eonserver.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/reinvantage-dev.eonserver.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/reinvantage-dev.eonserver.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=19172"}],"version-history":[{"count":0,"href":"https:\/\/reinvantage-dev.eonserver.com\/index.php?rest_route=\/wp\/v2\/posts\/19172\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/reinvantage-dev.eonserver.com\/index.php?rest_route=\/wp\/v2\/media\/19173"}],"wp:attachment":[{"href":"https:\/\/reinvantage-dev.eonserver.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=19172"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/reinvantage-dev.eonserver.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=19172"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/reinvantage-dev.eonserver.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=19172"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}