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John Woods John Woods · 16/04/2022
· Business

Hungarian economist: this is why the forint will continue to weaken

forint Hungarian economy Hungarian government Hungary
Hungarian forint

Photo: FB

Viktor Zsiday, a well-known Hungarian economist, wrote on his website about why he thinks the Hungarian forint will continue to weaken. He believes if the government maintains utility price cuts, even worse could come than the weak forint. Below you can read a summary of his article.

According to zsiday.hu, the Hungarian economy needs modification, but those will not be communicated as government restrictions. In a sarcastic post, he says that the government will introduce a “special economic operation” like Russia carries out a special military operation, according to what Putin says.

Zsiday also says that regarding the new measures, people should focus on 2023, not 2022.

The government calculated a 4 pc budget deficit for 2023. However, that is not viable. First, the loss of the National Bank of Hungary will be more than 1 pc of the GDP in 2022. Secondly, the increase of the Hungarian economy will probably be slower because of the war. Therefore, the budget deficit will be around 5.5-6.5 pc. Additionally, nobody can calculate the loss generated by the utility price cuts. But there will be significant losses if the energy prices remain high, he wrote. 

  • Read also: Hungarian forint plummets again – here is why

If energy prices remain high, the budget deficit might reach 8-9-10 pc of the Hungarian GDP, an unsustainable figure. Furthermore, the all-time jolly joker, the financial resources of the EU, are very uncertain.

If there is no compromise with the EU (= no money comes from Brussels), and the utility price cuts remain with the high energy prices, the government will need a “special economic operation” worth 5 pc of the GDP.

If there is a compromise, the government would need to find “only” HUF 500-1,500 billion, which is also an incredible amount of money. Before, the government introduced special taxes draining the bank, energy, and communications sectors. However, currently, these are in the hands of pro-government businesspersons.

If there is no compromise, there will be a significant austerity package, just like in 1994 when the budget deficit was 8.4 pc.

Zsiday says that the government will not be able to distribute that burden properly, so everybody will feel the consequences.

Without a compromise, the Hungarian economy may get on an Argentinian/Turkish economic downhill. That means a continuously weakening forint, high inflation, and price caps that do more harm than good. 

forint
Read alsoHere is why experts say Hungarian forint will never be strong again

Source: zsiday.hu

forint Hungarian economy Hungarian government Hungary
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John Woods
John Woods

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2 Comments

  1. Trepidation : says:
    16/04/2022 at 13:17

    21st century – applications that continue to be APPLIED – to anaylsis – the performance of a Country – its Financial & Economic presently – into the short and immediate term – then long term, the trend of the Hungarian Economy for the past 18 months – has indicated, Strongly – an Economy, that is in a SERIOUS downward Pressure position.
    Fidesz / Victor Orban – the prime excuse can’t be passed off to a Novel Virus nor the Russian War staged against the Ukraine – for the downward trending of the Hungarian Economy.
    Hungary – go back 4 years under this Government, when our relationship with the European Union – was on a “False” smile platform, the CORE direction – economically & financially – that the Fidesz / Victor Orban – Government led party – had coursed or set Hungary on, was of serious un-certainties – in particular – the long term RAMIFICATIONS or impact on Hungary.
    REMEMBER – those who at the recently held National Elections – who voted for a return to Government, the Fidesz / Victor Orban led Government of Hungary – you by your vote take Ownership & Responsibility – if as it growingly APPEARS – the humongous pressures – that are on the Economic & Financial postion of Hungary.

    WHO pays – for a situation – that the Big Picture – those who FULLY understand Economics – that look and study – the Massive European & Global Picture – that is a Pressure Cooker – that is PLASTIC or Volitile – fighting to find up-ward Economic & Financial stability in Trending – who pays – when Governments – are placed in this postion, as in FACT – the present Fidesz / Victor Orban led Government of Hungary are ???

    Answer – first and formost – the Citizens – through taxes.

    Hungary – nothing is Getting cheaper, and the Fuel Cap – its ceasing is sooner than later plus Inflation continues to Rise.

    The economic & financial componentry – ALL indicators respected – TREND downward – to harder Deeper, Challenging times in Hungary.

  2. Tividar says:
    20/04/2022 at 10:31

    Kleptocracy means it would be bad form to tax pro-government business persons considerate to politicians’ needs, right?

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