Noted economist expects no economic growth

Former minister of industry, Péter Ákos Bod, has told an audience of businesspeople in Budapest that - unlike the government - he does not expect economic growth next year, and the level of consumption is likely to remain low.

Speaking in front of the members of the Swiss, Dutch, British, French and Italian chambers of commerce in Hungary, economics professor Péter Ákos Bod, a former head of the National Bank of Hungary, voiced his opinion that the government failed in his efforts to start economic growth and this may have consequences in the governmental structure.

Regarding other government plans, he spoke positively of the “strong intention” to channel people back to work, although, that would also require the creation of lot of jobs; of strengthening the middle class and of bigger encouragement to the manufacturing sector. He added that the prospects of the Hungarian economy are not bad, despite the current difficulties.

Sharp changes

He reminded that in the early 1990s, Hungary was a ‘star’ in the region. Then, it began to fall behind and the country was hit so much by the world economic crisis because it had the highest debt in the region while its growth potential was already low. Certain trust-building measures improved the country’s image among foreign investors but now, its rating is just one category above the ‘junk bond’ level.

Since this economic policy – that the government called the “correction of the policy of the previous government” – has not produced the desired growth and increase in consumption as a driving force, the economics professor is of the view that 2012 is likely to bring the “correction of corrections”. He recalled that the government of Viktor Orban already made a sharp change in economic policy in the summer of 2010. It had planned to increase the country’s debt to fund its efforts but when the European Union refused that, the government decided to “fight” the country’s debt burden.

Debatable measures

He called several government measures in this ‘war’ as ‘debatable’, including the special tax levied on banks and multinational companies, the repayment of foreign currency based mortgages at preferential rates and the flat income tax. Now, Professor Bod believes the 2012 budget, currently under preparation, may also need to be modified during next year as may the whole economic policy of the past one and half years.