Page 54 - bneMag Dec22

54 I Central Europe bne December 2022
Hungary is experiencing the highest inflation in the EU outside the Baltic States, the worst depreciating currency in the bloc, and the prospect of recession next year.
Hungary faces risk of severe economic instability if it does not get frozen
EU funds, warns Oxford Economics
RTobert Anderson in Prague
he Hungarian economy is
being hit by a “perfect storm of shocks” and the “risks of a more severe scenario are
rising”, Oxford Economics warned in a research paper on November 17.
Hungary is experiencing the highest inflation in the EU outside the Baltic States, the worst depreciating currency in the bloc, and the prospect of recession next year.
The country’s position is weaker than its Central European neighbours because of its high fiscal and external deficits, and its bigger foreign currency external debt load, all of which are contributing to the deteriorating sentiment towards
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the forint, which has lost 13% of its value so far this year.
“Hungary's swelling external imbalance – the current account deficit is wide (currently over 6% of GDP) – makes the economy especially vulnerable to this kind of shock. And Hungary's external debt denominated in US dollars and euros is higher than in its peers, meaning that currency depreciation hits it disproportionately,” Oxford Economics says.
The dire economic picture is a telling verdict on the economic model followed by Prime Minister Viktor Orban’s radical rightwing government over the past 12 years, and most recently the big boost
to spending before this spring’s general election. Orban came to power in
2010 as a reaction to the 2007-9 global financial crisis but after some years of decent growth “Orbanomics” now looks like plunging the country back into crisis.
“If a number of catalysts – especially the cut-off of some EU funding – crystallise, Hungary could enter a period of macroeconomic instability not seen since 2008,” the consultancy said.
According to this crisis scenario, Oxford Economics predicts there would be a recession of 1.3% of GDP in 2023, GDP growth would remain weak into 2025, while inflation will not be back within