It was on April 16 that I wrote about the Hungarian government's convergence program that had been sent to Brussels the day before. At that time I said the following: "The document, entitled "Convergence Programme of Hungary, 2011-2016, … is long. Over seventy-two pages although there is an awful lot of padding. I'm no economist, but there also seems to be a lot of wishful thinking in this program." As it turned out, my first impression was correct. A few days later professional and highly respected Hungarian economists were saying more or less the same thing. László Békesi, former minister of finance and professor of economics, for example, in an interview with Népszava predicted that even low-level employees of the offices of the European Union would doubt the numbers the Hungarian government presented in this document.
Indeed. A month later the first reaction to the Hungarian convergence program is quite negative. You may recall that György Matolcsy's ministry prepared two forecasts: a more sanguine one (4-6% yearly economic growth) and a conservative one (3-3.5% economic growth). On the basis of this second prediction they figured a deficit of 2.5% for 2012 and 2.2% for 2013. But even the conservative scenario is too optimistic for the analysts of the European Union. For 2012 they predict a deficit of 3.3%, which is over the Union's limit. For this year economists in Brussels predict a deficit of 1.6% as opposed to the Hungarian figure of 2.0%, but they added that this figure is only a one-time phenomenon due to extra monies received from extraordinary levies on selected businesses and the "nationalization" of the private pension funds. Without them the real deficit would be above 6.0%.
According to the calculations of the office of Olli Rehn, EU commissioner for finance, the Hungarian estimate of a 3.1% economic growth this year is also too optimistic. They figure 2.7% instead, and their prediction for 2012 is no better: 2.6%. Inflation will remain, according to them, higher than the desired 3.0%. According to their predictions this year the rate of inflation will be 4.0% and next year 3.5%.
The European Commission also reminded the Hungarian government that last year's deficit target couldn't be met. Instead of the much promised 3.8% it turned out to be 4.2%. If for a couple of more years the Hungarian government is unable to meet the deficit targets (under 3.0%) serious sanctions could be applied. Hungary has been under scrutiny for the last six years because it was unable to keep its sovereign deficit under control.
Zoltán Török, an analyst with the Raiffeisen Bank, seems to agree with the European Union's deficit predictions. According to him, even if the Hungarian government manages to fulfill all the plans outlined in the Kálmán Széll Plan (a fancy name for the convergence program) the deficit will be over 3.0% next year. But there are potential risks that may derail the plan. For instance, as a result of the growing dissatisfaction in the population the government may be unable to save as much money from health care, education, and pensions as was planned.
The European Union's reaction to the convergence program is only preliminary. On June 7 a more detailed assessment will be published. It will be that second assessment that will be presented to the council of foreign ministers before the Hungarian convergence program's final approval by the Union.
And let's see what Magyar Nemzet has to say about all this. Nothing. Instead there is a headline: "The Hungarian economy reached a four-year peak." Admittedly, Brussels recognized that the Hungarian economy is growing, but it is primarily an export-driven economy and internal consumption adds little to that growth. And the world economy, as we all know, is not exactly moving along at a brisk pace. Therefore I consider the optimistic predictions of over 3.0% economic growth from economists who were asked by Magyar Nemzet a little suspect. After all, the government mouthpiece simply doesn't ask any economist whose opinion doesn't agree with the forecasts of the government.