Foreign press compares Hungary’s economy to that of bankrupt Sri Lanka

Experts agree that Hungary would face a huge financial hit if the European Union’s money did not arrive. In a comparison of emerging countries, the Financial Times mentions Hungary and bankrupt Sri Lanka in the same sentence.

Hungary’s economy in peril?

Hungary’s Prime Minister Viktor Orbán is in a difficult position because of the Hungarian economy. The Hungarian government must bow to the European Union and the country’s investors. This is how the Financial Times begins its article, writing that the government is promising to cut energy price subsidies and tax breaks while offering social reforms to Brussels.

The Hungarian budget deficit is growing, inflation is rising, the forint is weakening and the sell-off in the Hungarian government bond market is worsening the situation of the Hungarian economy. Brussels wants to see Orbán and the Hungarian government making some efforts to restore the rule of law. Hungary will not receive the EU recovery funds if the country fails to act.

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Mounting pressure

According to Zoltán Török, an economist at Raiffeisen Bank, market pressure in Hungary is enormous. Török believes that the government has no other option but to reach an agreement with the European Union, napi.hu writes. Without EU financial support, there is no chance for the Hungarian economy to grow. Besides, if there is no agreement, it will significantly worsen Hungary’s economic image worldwide.

The British business paper notes that Fidesz won another big victory in the spring elections, which the opposition has yet to overcome.

What does the IMF say?

The International Monetary Fund (IMF) also has its predictions for the future regarding the Hungarian economy. The IMF believes that Hungarian GDP could fall by 6 percent if Russia cut off gas supplies to Europe. The Hungarian National Bank has raised its base rate in vain, inflation is still close to 12 percent. Goldman Sachs analysts say this was not even the peak of the monetary deterioration.

Concerns about the weakness of Hungarian budget revenues sometimes raise questions about whether the government can renew its loans with new borrowing.

Featured image: illustration, anti-government protesters in Colombo

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Source: napi.hu, Financial Times