Today on the front page of one of the Hungarian dailies I read the following headline: "Promising economics indicators." What promising economic indicators? Didn’t I hear just yesterday from the mouth of László Békesi, former minister of finance in the Horn government, that there is a serious economic crisis in Hungary? Oh, yes,I did. And the day before? Lajos Bokros said the same thing. Yesterday afternoon in a political discussion on ATV I heard from Mária Schmidt, historian and head of the House of Terror and former advisor to Viktor Orbán, that in early 2002, in the last months of the Fidesz government, the Hungarian economy was in splendid shape while today there is an economic crisis. Schmidt is no economist, but at least one could expect from a historian a modicum of logical thinking and some basic knowledge of the country she lives in. Yet her political bias leads her to a totally false assessment of the economic situation. Six years ago the yearly growth of the GDP was about the same as it is now. The deficit was close to 10%, while now as a result of the austerity program, it is under 6%. Taxes, which according to Ms. Schmidt are unbearable, were actually higher in 2002.
Not that the Hungarian economy is in great shape, but one mustn’t exaggerate the current problems and distort history. Surely, Ms. Schmidt is simply parroting the words of economists whose assessment of the situation is perhaps a tad darker than the situation actually warrants. (Economics isn’t called the dismal science for nothing.) And then comes this headline about promising indicators.
So what are these promising indicators? For the first time since 1990 the value of Hungarian exports surpassed the value of imports. Here are some data points. In the first two months of 2004 Hungary imported 1782.2 billion forints worth of goods while it exported only 1684.7 billion. In 2008, during the same two months, Hungary imported 3118.7 billion forints worth of goods while it exported 3140.8 billion. By the way, note the growth of volume in both exports and imports. In year over year comparisons the value of exports grew by 20% while the value of imports grew by 16%.
Yesterday Ecostat announced that almost half of Hungarian small- and medium-sized companies believe that in the next quarter their income will increase and 38% believe that at worst it will remain stagnant. The number of pessimists, in comparison to earlier months, decreased by 13%. Large companies have also become more optimistic about their business prospects. Ecostat’s prognosis for this year’s GDP growth is between 2.5% and 3%.
The deficit is again smaller than was projected. In March the Ministry of Finance predicted a deficit of 344.5 billion forints but in fact it was only 325.9 billion forints. The Ministry predicted for the first quarter a deficit of 526.6 billion but it came in at 508.1 billion. The first quarter deficit was 1.9 percent of the GDP, which was on target.
Experts cannot quite explain why, but it seems that orders have been ticking up, and therefore it is not surprising that the confidence of manufacturers has also grown. More and more smaller Hungarian companies whose owners in the past complained about being unable to export their goods have recently been getting foreign orders. And the multinationals (who are threatening to pull out of the Czech Republic and Poland and move east) seem relatively content with their prospects in Hungary. Apparently they were favorably impressed with what Ferenc Gyurcsány had to tell them yesterday at the meeting of the Hungarian Association of Multinational Companies. He promised only modest tax relief, but somehow he managed to convince them that they can trust him.
Another promising statistic: industrial production has grown by 9.8 percent in the first two months of the year in comparison to the same period in 2007. The newspaper analysis I read considered this "modest growth," but again let’s see some figures. In February 2004 industrial production expressed in billions of forints was 1265, in 2005–1223, in 2006–1439, in 2007–1649 and in 2008–1840.
These are very promising signs of economic recovery. But another necessary ingredient is internal peace. Given Hungary’s political situation this is highly unlikely. Another referendum is threatening the country, this time on truly ridiculous grounds. The demand is that the government promise not to invite private healthcare insurers for at least three years. Since the government is in the middle of scrapping the original provisions of the health care bill concerning private investment this referendum is superfluous. But that doesn’t not make the slightest difference to the "civil organizations" responsible for gathering half a million signatures in favor of holding such a referendum.
And transit strikes that didn’t manage to cripple the capital a few days ago will try again, this time for at least twenty-four hours on Friday. The City of Budapest is asking billions from the central government to avoid the strike, but János Veres today made it perfectly clear that the government has no intention of giving one cent more to the troubled BKV. Gaskó’s trade union at MÁV is still threatening with a new strike and, by the way, he is also behind the signature gathering for a new referendum. An interesting role for a trade union at the state railways!