Comments on: Hungary’s Second Recession In Two Years Worsens http://fistfulofeuros.net/afoe/hungarys-second-recession-in-two-years-worsens/ European Opinion Mon, 13 Feb 2012 07:39:06 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Edward Hugh http://fistfulofeuros.net/afoe/hungarys-second-recession-in-two-years-worsens/comment-page-1/#comment-23686 Edward Hugh Sun, 15 Feb 2009 11:15:53 +0000 http://fistfulofeuros.net/?p=4663#comment-23686 Hi Daniel, Thanks for this. "All that said, the forint now looks undervalued, at least by the Big Mac index" Yep, this is my impression too, or at least very competitively valued if you think about the need to export. I reckon it's down by about 25% against the euro in the last six months (see the update I've just added to the post). So this does mean that - unlike the Baltics who are still dithering about whether to devalue - your export industries will be ready to rock'n roll when global demand picks up again. I don't see much prospect for internal demand though (except investments for the newly expanding export sector) even then. Hi Daniel,

Thanks for this.

“All that said, the forint now looks undervalued, at least by the Big Mac index”

Yep, this is my impression too, or at least very competitively valued if you think about the need to export. I reckon it’s down by about 25% against the euro in the last six months (see the update I’ve just added to the post). So this does mean that – unlike the Baltics who are still dithering about whether to devalue – your export industries will be ready to rock’n roll when global demand picks up again. I don’t see much prospect for internal demand though (except investments for the newly expanding export sector) even then.

]]> By: adaniel http://fistfulofeuros.net/afoe/hungarys-second-recession-in-two-years-worsens/comment-page-1/#comment-23662 adaniel Sat, 14 Feb 2009 09:14:22 +0000 http://fistfulofeuros.net/?p=4663#comment-23662 The Hungarian economy is in a very serious trouble, and I think a shrinking prediction of -3-6% is well founded. The recession is very deep because the government is now forced on a track of pro-cyclical policy: it expanded government spending in the boom and now it has to contract in the recession. In the past two years, the Hungarian government deficit went down by -8% per cent of the GDP, probably the steepest government spending contraction in the modern world in the past decades. Hungary was very much hit by a partly speculative attack on its small currency, the forint, mainly due to earlier reckless government spending and a low level of currency reserves in the beginning of the 2008 European financial crisis. All that sad, the forint now looks undervalued, at least by the Big Mac index, and the debt service ratios of Hungary are not worse than other Central European countries, and actually much better than in the 90s. While Hungary was liked by the financial markets when it spent 35% of the national budget on debt payment, this is now down to 12%, a very considerable improvement. All in all, a very long recession is in sight, but behind it there is a very positive and welcome structural change within the national economy with a seriously less redistribution and much more sensible government spending. The Hungarian economy is in a very serious trouble, and I think a shrinking prediction of -3-6% is well founded. The recession is very deep because the government is now forced on a track of pro-cyclical policy: it expanded government spending in the boom and now it has to contract in the recession. In the past two years, the Hungarian government deficit went down by -8% per cent of the GDP, probably the steepest government spending contraction in the modern world in the past decades.

Hungary was very much hit by a partly speculative attack on its small currency, the forint, mainly due to earlier reckless government spending and a low level of currency reserves in the beginning of the 2008 European financial crisis.

All that sad, the forint now looks undervalued, at least by the Big Mac index, and the debt service ratios of Hungary are not worse than other Central European countries, and actually much better than in the 90s. While Hungary was liked by the financial markets when it spent 35% of the national budget on debt payment, this is now down to 12%, a very considerable improvement.

All in all, a very long recession is in sight, but behind it there is a very positive and welcome structural change within the national economy with a seriously less redistribution and much more sensible government spending.

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