On 19 November, Republikon Institute held an event entitled "Hungary in the back of the classroom - can we still win from here?", where we discussed with experts on economic trends and representatives of domestic political parties what Hungary's current economic prospects are and what the various political actors can do in this situation.
Opening speach: Gábor Horn (Chairman of the board of trustees - Republikon Foundation)
Experts panel
Ildikó Katona (CEO of iPrivate Banking): He started the panel discussion with the impact of the US presidential election, the EU will certainly feel Trump's protectionism. Although inflation has been brought down, it can still seep back through the exchange rate, and the prospects for the Hungarian economy are not positive at the moment, but the end of the war can help with this. The causes of the current problematic Hungarian economic situation include the state's overspending and investment activity, as well as the unexpected loss of tax revenues, such as VAT. The reason for the deficit is, among other things, the inflexible tax policy. For railways, the role of market companies in the transition is extremely important, projects of this kind could boost the Hungarian economy, but the import of Chinese products is very depreciating our economy. Before the elections, government handouts will be expected again, and in the eyes of the voters, the short-term always outweighs the long-term, so family subsidies create a sense of importance.
Olivér Hortay (research institute director, Századvég Research Institute): Real wages have started to grow, thus providing a favorable outlook for the government. The energy price is an important input for the EU's competitiveness problems. Serious events have taken place in the international energy market in the past period, and the processes started in the supply chains are tying up politics. Returning to the Hungarian economy, we should start dealing with how the added value could be increased. Many people think that this is something that can be easily controlled by hand, but this is not true, because it must appear on every floor of the value chain in order for an economy to be strong. Energy is not a peripheral issue, it is currently considered the most pressing problem by company managers and the economy as a whole, which is why there are layoffs. He emphasized that one should not only think in terms of high added value, because a bigger picture perspective is needed. The real problem is the high energy prices, the effects of which are responsible for more deaths than global warming, because energy poverty has increased drastically and people are often freezing to death in their own homes. It is expected that Trump will withdraw from the climate agreement again, and the EU will continue to act as climate police, the economic scissors will continue to open, and climate change will definitely happen.
Zoltán Pogátsa (economist, expert in international political economy): The scale of the actual problem and its perception are not the same, as the American presidential election proves. The key indicators in the Hungarian economy are currently stagnating and showing mediocre performance, but this is nowhere near collapse. The national debt is also moderate, and employment is still sky high. Due to the low level of human capital development, it shows minimized growth potential. According to him, the Russian-Ukrainian conflict is not the main reason for the energy issue, but the EU must switch to independent energy production, however, it is important that energy is not the entirety of the economy. The employment model has run out of steam, and it is no longer possible to involve more people, even though the involvement and development of human capital would be important, and intensive development is needed instead of extensive employment growth. Regarding the promises of Viktor Orbán and Márton Nagy, an important aspect is the lack of EU funds, the prospects for obtaining them are not good. It would be possible to boost the Hungarian economy with projects such as the development of water management in Debrecen, the development of human capital, the expansion of railways and public transport, however, the National Defense The tripling of the Ministry's budget is a big mistake, and we don't need a highway expansion. From the point of view of the Hungarian state coffers, the amount of the worker's loan is an insignificant expenditure, however, housing is already a complex issue. The majority of Hungarian homes have an extremely poor energy rating. This is also why the energy policy is bad, because people think that they live in an apartment that they can maintain. Many people's houses cannot be renovated because they are in such bad condition, and the only solution to this is to renew the housing stock.
Political panel
Erik Bánki (Chairman of the Economic Committee of the Parliament, Fidesz): Assessing the current economic situation, the social effects that can be felt are the real wage, inflation and foreign investors. In 2020, the decline started with the covid, but in 2022, the growth started, which was stopped by the outbreak of the Russian-Ukrainian war. Currently, they support companies entering the international market. The bad indicators are the result of the failed sanctions policy, and the European forces have such a political motive that they want to replace the Hungarian national government. The consequence of Trump's election as president will be that an American ambassador will come to the country who will strive to improve relations. The government has a 21-point economic action plan, which includes support for small and medium-sized enterprises and housing.
Dávid Bedő (faction leader, Momentum): Judging by the current state of the economy, the destruction of the golden age by crises is a false statement, the country is exposed to many factors. The result of the cooperation between the Magyar Nemzeti Bank and the government is the devaluation of the forint. According to him, a change of government would give the economy a chance to break out, and the economic model should be reformed as soon as possible, and the focus should be placed on the service sector.
Antal Csárdi (representative of Budapest's 1st parliamentary constituency, member of the Parliament's Economic Committee): According to him, we cannot be optimistic now because of the high exposure. For the sake of the short term, the long-term strategy is completely abandoned, and we are not using the tools that could be used to maneuver better in the current economic situation. It is also a problem that the government is committed to multinationals, and that small domestic companies do not receive the support they need. Everyone knows that Trump will protect his own market.
János Hargitai (Member of Parliament, KDNP): When assessing the economy, he takes 2010 as a base and emphasizes the growth that has taken place since then. The next budget already shows that it is a pre-election budget. When emphasizing economic neutrality, based on the first laws of the economy, it is important that it is not affected by external ideological influence and that we can trade with whoever we want. EU funds are uncertain variables that would benefit us, and we will not give up our basic economic thinking about society just because that is what is expected of us. He highlighted the importance of domestic production for the ordered national defense equipment. In the medium term, the automotive industry will be a breakout point.
Kinga Kollár (European Parliament representative of the Tisza Party): He missed the fact that there was no investment in the past period that would secure the country in the long term, and the investment in human capital is also severely lacking, in his opinion it should be based on EU membership. The national capital is not based on a competitive model, and they can only enter the international market with state subsidies, and this is also reflected in the GDP subsidies. Since the market is pricing in how the economy is performing, interest rates are so high because the economy is not performing well. The breaking point would be the breaking down of institutionalized corruption, and the arrival of EU funds would be an additional positive effect.
Tamás Mellár (Vice-Chairman of the Economic Committee of the Parliament, Párbeszéd): the only source of growth is EU funds, and this has dried up. The debt trap will close soon because of the battery factories. He emphasized the importance of domestic entrepreneurs, but Fidesz is not interested in supporting healthy businesses. The EU is a customs union, so economic neutrality is a harmful proposition in this context. Due to the difference between the interest rate and the GDP growth rate for debt, we cannot go above 80%. According to him, the predictability of the budget is not true, and he sees no possibility of a breakthrough. At that time, entrepreneurs overthrew the socialist system, and this may be the case now.
Zoltán Vajda (Chairman of the Parliament's Budget Committee, MSZP): The impossibility of political debates depends on Fidesz, and the height of our national debt is the champion of Europe. Fidesz consciously plays with EU funds outside the country, and predicts a failed outlook for economic neutrality. According to him, the budget cannot be taken seriously, and the omission of EU funds is a conscious policy on the part of the government, which is replaced by a Chinese loan, the terms of which we do not know. Regaining market confidence would be a breaking point, but Fidesz is structurally unfit for that.
Dániel Z. Kárpát (member of the Parliament's Economic Committee, Jobbik): According to him, there was never an economic golden age, and GDP is not suitable for measuring prosperity. Hungary does not need battery factories, but rather software or engine developments. He also supports state interventions, and considers libertarian thinking to be narrow-minded. And state support should be directed in a different direction, the market does not solve everything. Creating homes and renting apartments would boost the economy, and there would also be a social demand for it. Unemployment benefits are limited, and a better pension system would also be needed.
Co-funded by the European Union. Views and opinions expressed are however those of the author(s) only and do not necessarily reflect those of the European Union. Neither the European Union nor the granting authority can be held responsible for them.
The event was supported by the Friedrich Naumann Foundation.
