The way GKI sees 2009

For Hungary (and for every other emerging country) the period of ample liquidity finished that came to en and last year meant that missing domestic savings could be substituted with loans from abroad – GKI lists in its 2009 forecast.

All of a sudden, the former development path became unsustainable on a global scale. There was a global re-assessment of economic trends. What had been positively viewed before as integration, open economy, attraction of FDI, a model of catching-up by modernisation etc., has become risk, exposure to unfavourable trends and a basis for negative judgement today. Hysteria and panic spread over the markets, sometimes in an overly simplifying manner. For instance, in the case of Hungary the substantial decrease of the general government deficit was underrated. The fact that the government accounts for less than one third of foreign debt was also not taken adequately into account. The larger part of the debt represents loans of mother companies given to their Hungarian subsidiaries and partly credits provided by foreign banks to their Hungarian daughter banks to finance loans whose repayment risk is low by international standards.

The global economic crisis hit the Hungarian economy at a moment when the improvement of external and internal imbalances had not yet attained the desired level and financial markets did not get used to new data. Thus, the image of Hungary is worse than its actual economic situation. Beside Hungary, in 2009-2010 there will only be few EU countries, where the general government deficit is around 3 per cent. Public debt is the highest in Hungary in the region, however, it is lower than the average in Western Europe, where it is expected to rise rigorously! The external financing requirement is the highest among the Visegrád countries, however, it is substantially lower than in the Baltic states, Romania and Bulgaria. The foreign debt service is 12-13 per cent of exports, slightly more than the same figure in Poland.