Statement by the IMF Mission to Hungary

An International Monetary Fund (IMF) mission visited Budapest during July 17-25 to start discussions on an IMF/EU-supported program following a request by the Hungarian authorities. The IMF mission worked in close cooperation with a mission from the European Commission and observers from the European Central Bank. At the conclusion of the visit, Thanos Arvanitis, IMF mission chief for Hungary, issued the following statement:

“The Hungarian economy continues to face a series of interconnected challenges related to high public and external indebtedness, strained bank balance sheets, weak confidence, and elevated risk perceptions. Amid a difficult external and domestic environment, real GDP is expected to contract in 2012 and recover modestly in 2013. Beyond the current cycle, historically low levels of private investment and labor participation cloud the growth outlook.

“The key near term challenge is to maintain macroeconomic and financial stability, while building the foundations for a more robust recovery which is necessary to raise living standards. Policies should therefore aim to advance the needed fiscal consolidation in a sustainable manner, restore the soundness of the financial sector, and set in place a more business friendly environment and promote structural reforms, building on the objectives of the original Széll Kálmán plan.

“The authorities’ commitment to the fiscal targets under the revised Convergence Plan in 2012-13 is welcome. However, greater focus should be placed on achieving a more balanced fiscal consolidation, shifting away from ad hoc tax measures towards streamlining public expenditures, while ensuring adequate support to vulnerable groups. A smaller and more efficient state with strong and predictable policies would create better conditions for private-sector led growth, and reduce the tax burden over time. For 2013, additional measures will be necessary to secure the government’s deficit target, and put public debt firmly on a downward path.

“The monetary policy stance remains appropriate, reflecting the recent uptick in headline and core inflation and persistently elevated risk premia. The contracting credit reflects mostly structural challenges confronting the banking, household, and corporate sectors as well as recent policy actions. Reforms to restore banking system soundness in a more business-friendly environment are critically important so that banks can contribute to economic recovery.

“Generating higher and more inclusive growth will require more emphasis on structural reforms. The focus should be on measures to encourage labor participation, advance competition, reform loss making state-owned enterprises, notably in the area of transport, and put in place a regulatory level-playing field for all companies.

“The IMF mission, jointly with its European partners, has had constructive discussions with the authorities on these issues. The dialogue will continue in the period ahead.”

Press Release No. 12/276
July 26, 2012

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17 comments

  1. There was another statement today by the top economists in Europe relating to the economic “survival” of Europe. Although it concentrates primarily on the Eurozone, most of the comments can be applied to Hungary also.
    The resommendations are similar in many aspects to the statements of IMF mission. The problems are extant not only in Hungary but in other countries of the Europe. Claiming that it is a unique Hungarian problem is not correct. The “Egyedul vagyunk” does not apply.

  2. Louis Kovach :
    There was another statement today by the top economists in Europe relating to the economic “survival” of Europe. Although it concentrates primarily on the Eurozone, most of the comments can be applied to Hungary also.

    The resommendations are similar in many aspects to the statements of IMF mission. The problems are extant not only in Hungary but in other countries of the Europe. Claiming that it is a unique Hungarian problem is not correct. The “Egyedul vagyunk” does not apply.

    Not that similar, Kovach, you forget about the human factor! Matolcsy is one of a kind :-) He is only ours!!!

  3. Louis Kovach :
    Claiming that it is a unique Hungarian problem is not correct. The “Egyedul vagyunk” does not apply.

    Well, compliance with the EU regulations will greatly help with “surviving together” business.

  4. Louis Kovach :
    I forgot to post the source. Here it is:http://ineteconomics.org/sites/inet.civicactions.net/files/INET%20Council%20on%20the%20Euro%20Zone%20Crisis%20-%2023-7-12.pdf

    Thanks for the interesting read.

    Well, the IMF recommendations for the EU does not mention:
    - the need to create a business-friendly environment
    - the need for “shifting away from ad hoc tax measures towards streamlining public expenditures”

    Both are Hungary specific issues, thanks to our economic geniuses, Matolcsy & Orban.

    Yes, in both documents they call for fiscal balance and promotion of long-term growth (dream on, IMF)… but in a very different context. As for the EU, they talk about the structural imbalances BETWEEN countries and the need for a coordination of the financial system to make the financial system sound, while in the case of Hungarian banking they talk about “reforms to restore banking system soundness in a more business-friendly environment “.

  5. Totally not to do with the content, but for weeks now I get this huge Follow Me block on my page asking me to sign up for e-mails from Spectrum. I don’t want that, but can’t get the block from my screen. Highly irritating.

  6. This is the normal sort of statement I would have expeted. The nasty business comes later

  7. HANK: Me too. But if you click first on the “comments”, then scroll up to the top of the page the “Follow Me” doesn’t show up.

  8. Well, if you read between the lines of this politico statement:

    “The IMF mission, jointly with its European partners, has had constructive discussions with the authorities on these issues. The dialogue will continue in the period ahead.”

    Doesn’t “constructive discussions” mean that we agree to totally disagree ?

    And “dialogue will continue” means imho that it will take a long time to get any results …

  9. wolfi :
    Well, if you read between the lines of this politico statement:
    “The IMF mission, jointly with its European partners, has had constructive discussions with the authorities on these issues. The dialogue will continue in the period ahead.”
    Doesn’t “constructive discussions” mean that we agree to totally disagree ?
    And “dialogue will continue” means imho that it will take a long time to get any results …

    It is quite sad that even today one has to make guesses like the Kremlinologists used to make, based on totally neutral words (and the order in which people were standing during the May Day parade). One would expect clear language so that everyone can understand where things stand.

  10. While in this blog, this philosophy is attributed to “Crazy Orban” it appears that the problem is described by others also as incorrect. Please do not jump on me, I am not andorsing Orban, but – in my opinion- the issue is brother than Hungary and Orban.

    The Czech President Vaclav Klaus calls for a shift away from European integration and the concept of social market economy. He also demanded in the “Handelsblatt”, Europe must allow the crisis countries leaving the euro zone and the return “to their own currency arrangements”. Approach to tackle the economic and financial crisis in Europe, with more community and country influences, he calls it “almost communistic”.

    “Europe must be free from the unproductive and too paternalistic social market economy, which is due to the growing role of the green ideology weakened further,” asks the Europe-critical Czech president. Europe should “stop the excessive centralization, standardization and harmonization of the European continent and address the radical decentralization, deregulation and Desubventionierung our economy and society,” he wrote. The idea of ​​a fiscal union should forget about the Europeans, “not to mention anti-democratic ambitions, some of the continent politically.”

    Klaus spoke out for it also, that in the course of crisis resolution, if necessary, “even some states should be dropped.” Another “muddling through” as in the past doing things more expensive. “One day, the costs are intolerable and unacceptable,” he warned.

  11. This blog is about Hungary, but yes, surprise surprise, in other European countries there are also people who are really critical of the EU. There is also at least one EU-sceptical faction in the European Parliament, and that does not even include Jobbik. But thank you very much for the pearls of wisdom from Vaclav Klaus. They sound even more convincing in this neat translation into English!

  12. I can not accept the criminal manipulations, destruction of law, and internal brutality of mini dictators like orban.
    He grew up as a communist baby, and turned out a big crook.
    Why is there any sympathy for his mafia?

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