Economic recovery IS on the way

Quite a few economic indicator figures  have been released this morning.


The European Commission has published their economic forecast.  They predict Hungary’s GDP would grow by 2.3% (up from their estimate 2.1% in February), the budget deficit would stay below the Maastricht-criteria three percent limit and Hungary’s yearly inflation rate  would be only 1 percent.

Hungary’s KSH (Hungarian Central Statistical Office) has published data about  foreign trade  and the number new properties built.

  • Exports increased by 7.1%, imports grew by 5.7%  in the first two months of  2014 (year-on-year). The balance of trade surplus was 321 million EURs more and it grew to 1.242 billion EURs. Vow!
  • 51% more properties were built in Hungary in the first three months of 2014 than a year earlier!

Besides the Association of Logistics, Purchasing and Inventory Management (Halpim) has announced that Hungary’s seasonally-adjusted Purchasing Managers Index (PMI)  climbed to 54.6 points in April from 53.7 points in March, indicating further growth.  (50-plus points means growth.)

By the way, last week  Hungary’s National Bank announced that they will  convert their two-week bill facility into a deposit instrument with the same maturity from August.  The facility, the basis of the country’s benchmark interest rate, will no longer be accepted as collateral by the bank and foreign investors will be barred from it.  This is a  very significant measure  indeed to  encourage a further shift towards financing Hungary from domestic, Forint-based sources instead of foreign currency based sources and to reduce the country’s external vulnerability.  As a reminder, Japan’s GDP-to-public debt ration is 220+% and that’s possible only because Japan owes their debt to its own citizens and companies, not to foreign ones.


Update on the 6th of May:     KSH has announced retail sales have increased by 8.3% year-on-year in March, after 6.7% y-on-y in February.



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Who do you owe to?

Due to the irresponsible, crazy political and economic policies of the Hungarian Socialist-Liberal (MSZP-SZDSZ) coalition, Hungary’s public debt ratio quickly rose from around 50% to around 80% between the disasterous time period of 2002-2010.  When the global economic-financial crisis hit, Hungary de fact defaulted in 2008 and only the huge IMF loan (25 bn Euros) saved the country. (The Orbán government paid it  all back last year, one year earlier before the last instalment was due.)

Government debt ratio compared to  the GDPEven though the 80 percent debt ratio is now not uncommon in Europe (in 2012, Belgium had 99.8%,  France had 90.2%, Germany had 81%, Spain had 86%, the UK had 88.7%)  this high debt ratio is still a problem for Hungary. And that’s because the debtors have been mainly foreign funds with little or no commitment to Hungary as a country.
On the other hand Japan has a 220 percent debt-to-GDP ratio and that’s manageable for them…  The reason is because Japan, and also the previously mentioned countries, owe their public debt mostly to their own people and companies.

So this graph, which shows the Hungarian Treasury bonds owned  by residents, is very promising indeed. Hungarians trust the country with their money at last.

Hungarian T-Bills owned by residents

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Even lower income tax?

Prime Minister Orbán delivered a speech on a business forum in Tokyo

Prime Minister Orbán delivered a speech on a business forum in Tokyo

Prime Minister Orbán delivered a speech on a Tokyo business forum today.   He told the audience about the new Hungarian 16 percent, flat rate, family-based income tax system which was introduced in 2011.  He said he thinks income tax is a bad thing and ideally he would like to see a “zero percent” income tax.  He expressed his hope  Hungary could have a single digit income tax in a few years.   He added 60 percents of the income tax was, and still is, paid by the top twenty percents of tax payers, so this is not what the change is about.  What changed is that the previous tax regime penalized economic achievements, it demanded too much from those working legally and “it opened up the gate of tax evasion for large crowds of people”.    He emphasized that the new Hungarian tax system aims to tax consumption instead of income.

Time will tell if this would work out and if it would become another step in the “Orbanization of Europe”.

BTW, here is an interview with Mr. Orbán broadcast by the Japanese public service TV where he stressed that Hungary must diversify her export markets and this is also a reason why Japan is considered an important economic partner for Hungary.

Viktor in Japan

Prime Minister Viktor Orbán, delivering a speech today in Kaposvár: “Hungary needs more births than deaths”

Viktor has travelled to Japan this evening.  He’s going to hold a lecture at the (private) Josai University with the title “Hungary and Europe in a changing world”.   It sounds like the lecture will have a geopolitical aspect, something like what Stratfor praised him for when he delivered this lecture in London recently.

Besides he’s going to open a Hungarian culture and tourism centre in Tokyo, he’ll deliver a speech at an event of the Hungarian-Japanese Business Forum, he’s going to meet Japanese businessmen  and he’s going to have official talks with Japanese Prime Minister Abe Shinzo.

What surprises me is that he is also going to meet  Emperor Akihito and Empress Michiko. I thought the Japanese Emperor usually meets only other heads of states…

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