"Hungary’s potential economic growth should be 2 percentage points over the corresponding EU figure in order to ensure convergence, Prime Minister Gordon Bajnai said in London according to a Reuters report.A desirable growth rate for Hungary is around 4%, which may help reduce the country’s high government debt, Bajnai said in a presentation at the EBRD headquarters. A large number of analysts share the view that Hungary’s GDP growth potential is around 4%, he added.
Thanks to 15% appreciation in the exchange rate of the forint recently, there is no major threat for households to realize huge losses on FX loans, Bajnai said. The Prime Minister admitted the possibility of currency depreciation as a result of a contagious impact from other countries, however stronger economic fundamentals may help reduce this threat, he added.
Portfolio.hu viewpoint:
We have read Bajnai’s statement with a measure of surprise, as GDP estimates for Hungary have been typically way below 4%. The most pessimistic forecast is lower than 2%, and we are not aware of any serious estimates above the 3% mark. Otherwise, the argumentation is perfectly fine - Hungary does need high growth in order to stay on a sustainable government debt path, however this would take a great deal more effort than has been done so far, as in our knowledge the coveted 4% growth rate is way beyond reach (even if you take the uncertainty of GDP estimates into consideration)."
Source: Portfolio Online Financial Journal
12.10.2009