Orthodox vs. unorthodox

Portugal is comparable to Hungary both in population  (10 million people) and in territory (92,000 and 93000 square km respectively).  Both countries are peripheral to the core economies of Europe.  The differences are significant though. Portugal is a member of the Euro zone and Hungary has its own currency (Hungarian Forints).    Portugal is a Mediterranean country with an Atlantic Ocean shore, Hungary is a land-locked country in Central Europe.  So the culture and the history are very different, too.  Portugal’s GDP per capita was 20,180 USD in 2012 and Hungary’s was only 12,620 USD.     Another difference is that Portugal chose to follow the EU/IMF economic recipes in 2010 but Hungary chose to rebel against them.

Still, let’s see some quick comparisons how some economic figures, and especially the ones important for people’s everyday life, have changed in good boy Portugal and in bad boy Hungary since then.    First let’s review some basic, major figures which are somewhat indicative of how these economies were doing in 2010 and how they are doing now:

GDP growth in Portugal and Hungary

Unlike in Portugal’s,  Hungary’s GDP starts to grow

seems to decline...

Hungary’s external debt seems to decline…

... seems to look worse and worse...

Portugal’s external debt problem seems to get worse…

A positive trade balance means you sell more than  you buy.  Hungary’s trade balance was always negative prior to 2009 but Hungary has been producing big pluses since then.

Balance of trade (exports minus imports)

While Portugal’s trade balance doesn’t show any improvement, Hungary’s balance of trade looks great

Now let’s see those figure which directly affect people’s lives.  While Hungary still had a relatively high inflation in 2010, Portugal had a very low inflation in 2010.  Portugal experienced a peak  in the meantime but  their inflation rate is back to nearly zero  again.  Inflation has  decreased to nearly zero in Hungary  only recently.

Consumer Price Index in Portugal and Hungary

Consumer Price Index in Portugal and Hungary

Unemployment rate is something which really affects people. Unemployment at a young age and long term unemployment are especially devastating.

Young people's unemployment used to be the same, now it's much worse in Portugal than in Hungary

Young people’s unemployment used to be worse in Hungary  in 2010 than in Portugal, now one can put it the other way around

... just like the situation with long term unemployment...

… just like regarding the situation with long term unemployment…

And the overall unemployment rate shows the same picture.

And the overall unemployment rate shows the same picture.

And what about the wages and the income tax which also directly affect people?

I can see some emerging pattern here, too.

I can see some emerging pattern here, too.

Portuguese  income tax up, Hungarian income tax down

Portuguese income tax up,
Hungarian income tax down

Maybe the progress happened at the expense of the business sector in general? Let’s see the construction output

The black line belongs to Portugal

The black line belongs to Portugal

or foreign direct investments:

The blue dotted line belongs to Hungary.

The blue dotted line belongs to Hungary.

or the corporate tax rate:

The constant blue line shows the Hungarian data

The constant blue line shows the Hungarian data

Well, let me not draw the final conclusion yet that the EU/IMF orthodoxy is a complete failure and the Hungarian “unorthodoxy” is a complete success because the jury is still out on this. Let’s regard these charts instead as a report after three years on the progress of a 10-20 year race.  To filter out the effect of Portugal’s having the Euro, which I think is largely responsible for the troubles in Portugal,  and Hungary’s having its own currency, I’ll have to do a similar comparison with ‘good boy’ Romania… and caution will be required there, too.

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