The forecast of GKI Economic Research Co. for 2011

Some key indicators of the Hungarian economy are improving simultaneously with the easing of the global economic crisis; however, the real situation is not better than it was at the time of the change of government. In 2011 external demand has been somewhat better than expected. The decline in domestic demand has been over. The government was forced to announce restrictions it wanted to avoid during the past year and before, when the parties supporting it were in opposition. These announcements have inspired cautious confidence among foreign investors and high anxiety among those concerned. External disequilibria continue to improve. The general government deficit (excluding the nationalized pension fund assets) has changed as envisaged. The exchange rate and debt risk premiums are again at levels they were before the change of government. As a result of last year’s unconventional economic policy Hungary's ability to attract capital and to generate economic growth weakened. The question of how to restore it is still waiting for an answer. The general government structural deficit is significantly increasing. The financial reserves of small businesses and the middle classes are increasingly exhausted. Social tensions are intensifying.