Hungary: Sick Man or Dynamic Hub?
Posted by jonathanfryer on Wednesday, 25th June, 2008
Hungary’s charismatic State Secretary for the Economy, Abel Garamhegyi, was in London today and gave a presentation at Eversheds’ splendid new offices near St. Paul’s on his country’s economic performance since it joined the European Union in 2004. He’d just been at Bloomberg TV, where he was asked bluntly whether Hungary is the new Sick Man of Europe (a term applied to the Ottoman Empire in its closing days). But he was going on to British Telecom, which has invested heavily in Hungary, where he could be assured of a more upbeat welcome. His task at the briefing with corporate lawyers and other City types (plus me) was to portray Hungary as the dynamic hub of a European sub-region, notably looking east and south, with heavy involvement in places such as Montenegro and Romania.
It is true that Hungary’s growth rate is well below that of some of its neighbours, but Mr Garamhegyi argued that this masks a reality in which the state sector has been shrinking (including a reduction in the number of teachers, as school enrolments have declined), whereas the private sector has been blossoming. Certainly there has been some encouraging inward investment, the biggest catch so far being a giant project by Daimler Benz. Moreover, despite its small size, Hungary attracts 15 per cent of all new Research and Development jobs in Europe, second only to the United Kingdom.
As everywhere, Hungary has been hit by rising energy and food prices and there are certainly significant macro-economic problems at the moment. Things are not helped by the strength of the Hungarian currency, the forint. Given its high level against the euro, there is little prospect of Budapest opting to join the eurozone soon.
The seminar was arranged by International Financial Services London