Looming unemployment crisis in Hungary
With the drastically increased utility costs, it is feared that dismissals will be a common sight in the near future. The unemployment rate can jump to around 4-4.5 percent. This is shocking, but not unexpected. It was obvious that businesses would need to close and the employees will therefore lose their jobs. The problem is that this will have ripple effects on the economy, further worsening the crisis.
There is a cost of living crisis going on which have two main contributors: inflation and energy price hikes. More money spent on living means less money to spend on anything else. While families save money by not spending money, they also withdraw from the economy. The service sector was hit the hardest. Businesses have to pay increased utility costs, but at the same time leisure activities are the ones where people can cut their spending. This essentially means increased costs with less profit.
Effects
With less profit, the risk grows especially for small and medium enterprises. This means that creditors will have less incentive to invest in such businesses. This means fewer loans for riskier business models. Large enterprises and multinational businesses have better chances of surviving the current recession. The market will shrink, businesses will close and unemployment will grow. Many leisure facilities will have to increase their prices to manage the financing of their increased utility costs. However, this will deter further customers from taking in their services. In other sectors too, the reduced demand will cause trouble.
The fortunate thing about the unemployment crisis is that Hungary had labour shortages in many areas. First, the labour shortage will shrink, and then it will turn into an unemployment crisis. However, this will reduce the overall effect of the mass dismissals. An analyst in an interview with Index.hu said that wage subsidisation could help preserve jobs so that fewer people will lose them. For small and medium enterprises, the Hungarian government provides utility subsidies with the condition that the workforce does not fall under 90 percent of the original number.
Due to these factors, analysts predict that the unemployment rate will grow to about 4-4.5 percent. A large immigration wave out of the country is not expected because this is not a local crisis. Therefore, it is unlikely that most people would look abroad for better opportunities. Including those who are not part of the official data, the unemployment rate can even rise to about 5.5 percent at the lowest point of the crisis.
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Source: Index.hu