Euro wouldn't protect Hungarian economy
Van összefüggés az inflációs és a GDP-adatokban, hiszen a belső kereslet és fogyasztás mindkettőt befolyásolta. Egy elemző rámutatott, a többi uniós ország jelentős pénzromlása a gyenge forinttal együtt a magyar mutatót is felfelé húzhatja, írja a Világgazdaság.
Although high demand undoubtedly plays a role in rising inflation, which also pulls GDP upwards, rising prices can be better explained by looking at the supply side, that is, at the fragmented supply chains and rising production costs,
Gabor Regos, head of the macroeconomic division of the think-tank Szazadveg Konjunkturakutato Zrt, told Vilaggazdasag. The economic paper asked the expert about the first-quarter GDP and April’s inflation data put out by most European Union member states last week. Analysts say that a correlation can be found between the two. Domestic consumption played a major role in the excellent Hungarian GDP growth of 8%, but on the other hand, demand also increases inflation.
The Hungarian Central Statistical Office (KSH) reports that inflation in Hungary reached 9.5 per cent in April, while Eurostat puts the value at 9.6 per cent.
The four price caps in Hungary (on fuel, basic foodstuffs, interest rates and utility costs) brought the indicator down by about 6 percentage points, said Marton Nagy, candidate for heading the Hungarian Ministry of Economic Development, at a hearing before the parliamentary economic committee. With 9.6 per cent inflation, Hungary is ranked tenth among EU countries, positioned around the middle of the list. Estonia has the highest inflation at 19.1 per cent, followed by Lithuania with 16.6 per cent, and
overall, 9 out of 27 countries have posted figures above 10 per cent.
By comparison, no EU country had inflation rates higher than 5.5 per cent last year, and only Czechia, Estonia and Lithuania posted double-digit figures even in February this year. Malta and France reported the lowest figures, both at 5.4 per cent, which would have put them among the worst performers in terms of inflation in April 2021.
Hungary is tied with Croatia regarding inflation numbers, and there are countries in which the situation is much worse. This is bad news for the value of the Hungarian currency, as it shows high external inflation, which is pulling the Hungarian figure upwards. At the same time, it is also clear that price hikes are also significant in countries that use the euro, so that doesn’t provide protection either. There is no doubt, however, that a stronger forint rate is needed to bring inflation down,
Mr Regos pointed out. The forint rate is exactly where it should be, because it is determined by the market, Marton Nagy said. Hungarian Finance Minister Mihaly Varga told the parliament’s economic committee that the euro is not a magic bullet, and that a country can get into big trouble even if it uses the European currency, adding that fiscal policy should also play a role in fighting inflation, while the tools of monetary policy are broader.
In terms of GDP, however, Hungary’s 8 per cent growth rate is very positive, the fifth best in the EU. The V4 country was listed in fourth place after Eurostat data were released, but since then Slovenia has published an indicator of 9.8 per cent. It is also likely that among the six countries that have not yet put out their figures, some will have fared better than Hungary in Q1 – Malta and Ireland most certainly. This will also raise the EU average, but not by so much that the Hungarian figure does not exceed it, as it is currently at 5.2 per cent.
“It is important to stress, however, that in the recent period, for example in the wake of the coronavirus pandemic, the situation of individual countries may have changed significantly from year to year, quarter to quarter. This is one of the reasons for Portugal’s 11.9 per cent year-on-year expansion in the first quarter, as the base period was characterised by significant restrictions and the economy was barely functioning. Among the V4 countries, Hungarian growth was the second largest after Poland, while the Czech and Slovak growth lagged behind,” Mr Regos pointed out.
Commenting on the data, Mr Varga said that the Hungarian economy remains crisis-resistant, government measures have effectively mitigated the impact of the Russia-Ukraine war, and almost all sectors contributed to growth, with industry, construction and the financial sector performing well, while retail and tourism also grew thanks to high employment and wage increases. Nevertheless, the minister noted that the war and the sanctions against Russia continue to pose a major threat to the performance of the Hungarian economy.