EDP Out, FDI Up, Consumer Skepticism Down

“That’s welcome news. As I posted earlier this week, this is a milestone that should draw to a close the era of debate between Budapest and the EU over Hungary’s economic policies. The Orbán Government’s approach to budget discipline and financial stability in order to cut deficits, reduce debt and encourage growth have achieved results, and Brussels has taken notice.

According to Commission estimates, the 2013 deficit will reach 2.7 percent of GDP, well below the EU’s 3 percent threshold and thanks to a series of consolidation measures. If forecasts hold, this would mean that government debt would continue to drop, falling below 77.0 percent of GDP in 2013 and even further in 2014. (...)

In 2012, Hungary attracted some 10.5 billion euro in foreign direct investment, close to three times the 2011 level. The total, inbound FDI grew to 78.5 billion euro by the end of last year, bringing it to the highest level in terms of percentage of GDP of any country in Central and Eastern Europe. Hungary’s inbound FDI-to-GDP ratio is 80.3 percent. In the Czech Republic, it’s 67.7 percent, and 57.4 percent in Slovakia, while Poland and Romania are lagging far behind with 45.8 percent and 42.4 percent, respectively. (...)

And despite the National Bank’s continued rate cuts, the forint has been strengthening. The forint’s value hit a 5-month high, followed yesterday by the Central Bank cutting the base rate again. Lower rates will be key in making financing affordable again.

As a milestone, today’s announcement about the EDP is big news. Together with the other positive numbers coming in, these are important signs that the markets – and, finally, Brussels – are starting to trust Hungary again after the ‘lost decade’ between 2002 and 2010. It’s our job to make sure their trust continues.”