Inflation might have one positive impact on the Hungarian economy
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It might be hard to imagine, but inflation can have positive impacts on economies. The rising prices decrease demand, while it makes future outlooks uncertain. Reaching stable prices is in everybody’s interest. Despite the terrible situation, inflation might help to save the Hungarian economy if economic theory comes into play.
As prices skyrocket, wages cannot keep up with the demand. The Eurozone has not experienced such a crisis in its short history. In some member states, we can even see forty-year records being broken. While in Hungary, inflation is well above 20 percent now. Although wage raises reach unprecedented levels, they cannot keep up with the inflation rates. This, combined with the rising operating costs, makes the whole situation even worse.
The positive side of inflation
From the article of Portfolio.hu, it turns out that inflation can also decrease the national debt. On the one hand, the rising prices increase tax revenues. On the other hand, inflation brakes the balance in the debt-to-GDP ratio. The first aspect is quite easy to understand, but it is the smaller part of the equation. As prices rise, so do the taxes included in the price. So, if prices grow by 20 percent, the tax revenues on the sold products also grow by 20 percent.
Debt-to-GDP ratio is a bit harder to understand. To avoid growing national debt, the economy of a country has to grow more than its national debt does. This makes sense so far, as the economy is able to generate enough coverage to pay for its debt, decreasing national debt over time. This was the trend in most European countries before the Covid pandemic.
This article excludes a VITAL factor in the “Shambles” that presently exists in the Hungarian Economy.
When economists or those trying to be RATIONAL by use of Economic or Financial Theories, discussing – as this article does, the RELEVANCE of massive IMPORTANCE – must be applied NEVER forgetting – that Hungary, with a VAT of 27% – the highest in Europe, its IMPACT on Inflation.
Rationality in past times of Global Financial & Economic Stability – was a dangerous “plank” to walk.
In these times of the 21st century Global Cataclysmic un-certainty of Financial, Stock, Currency and Commodity Markets – any individual who DARES to use the word RATIONALITY – may consider taking a break, in a Health or Spa Facility.
Don’t whoever you are of Eminency or whoever, don’t talk Inflation – the what ifs in Hungary, giving voicing of opinions into the FUTURE, of the shambolic Hungarian economy, without referring to the 27% VAT that Hungary levies in the componentry of its Economic & Fianacial balance sheet – accounted for in its Income.