Surprise Turn as Analysts Misinterpreted Government's Intentions on Economic Strategy
In a recent analysis released on Wednesday by GKI, it was suggested that the challenges faced by the Hungarian economic policy could be ascribed to external factors.
As a result, the administration has not initiated the development of a new economic strategy to replace the criticized re-industrialization program. Gergely Suppan, the leading economist at the Ministry of National Economy, responded to these allegations.
“The policy of industrialization and re-industrialization is not flawed. In fact, Szeged is on the verge of welcoming one of the most modern and competitive electric vehicle manufacturers in the world. At the same time, Hungary is becoming home to the most advanced, high-tech battery factories,” Suppan defended the re-industrialization program. He added, “It is precisely thanks to our successful industrial policy that the inbound foreign direct investment (FDI) presents a diversified structure across a variety of industries shaping the future.”
Suppan supported his argument with data indicating that Hungary's exports of high-tech content and complexity rank among the world's best: 11th globally and 6th in Europe in terms of export complexity, 5th globally in the percentage of high-tech manufacturing, 9th in the export of creative products, and 10th in high-tech exports.
“Many would envy us if this signifies a failed re-industrialization,” the leading economist remarked pointedly. “We recommend that everyone should visit the factories to see for themselves how Hungarian industrial workers work in the most modern factories, which is a source of our pride.”
SUPPAN: HUNGARY TO REACH 90% OF EU DEVELOPMENT LEVEL BY 2030
Continuing, GKI criticized the government for apparently resorting back to a moderate inflationary economic policy due to limited maneuvering room without proposing a new economic strategy. Contrary to these critiques, national economist minister Márton Nagy introduced the government's new competitiveness strategy on Monday, stating that there is no need for an economic turnaround but rather a fine-tuning of the existing strategic goals and toolkit, Suppan retorted.
According to the expert, the primary goal for 2024, following successful inflation mitigation, is to restart economic growth. Hungary was severely affected by the energy crisis in Europe caused by the war, as it is reliant on imported energy. “We have started establishing solar farms and expedited the expansion of the Paks nuclear power plant. The government remains committed to its goal of reaching 90% of the European Union's development level by 2030,” Suppan detailed.
The ministry expects the Hungarian economy to rebound with a growth between 2-3% in 2024, reaching around 4% by 2025, indicating a recovery within two years.
Challenges ahead include restoring consumer spending growth, further increasing employment and activity rates, and maintaining and enhancing the level of investments. “In expanding exports and industrial production as part of re-industrialization, we aim not only to rely on foreign corporations but also enable domestic medium-sized enterprises to actively penetrate international markets,” Suppan emphasized.
To achieve this, the government aims to facilitate the creation of national champion companies through various programs targeting industrial sectors where Hungary has a competitive edge.
Suppan also addressed criticisms regarding the government's inability to stimulate the entrepreneurial sector, citing barriers such as budgetary constraints, the adverse consequences of forced interest rate reductions, and the risks associated with investment decisions.
"The recent cycle of interest rate reductions has by no means been forced," Suppan rebutted, highlighting the demand for lower interest rates from entrepreneurs and professional associations responsible for preserving jobs, which is critical for both survival and advancement.
In conclusion, despite GKI's concerns over a potential tightening of fiscal policy post-elections and the initiation of an excessive deficit procedure without sanctions, Suppan stressed the importance of reigniting and sustaining economic growth to ensure a manageable deficit reduction through increased tax revenues and automatic stabilizers. "Budgetary balance and economic growth go hand in hand," Suppan concluded, firmly opposing the return to failed austerity measures that could jeopardize the budding economic recovery.
“The policy of industrialization and re-industrialization is not flawed. In fact, Szeged is on the verge of welcoming one of the most modern and competitive electric vehicle manufacturers in the world. At the same time, Hungary is becoming home to the most advanced, high-tech battery factories,” Suppan defended the re-industrialization program. He added, “It is precisely thanks to our successful industrial policy that the inbound foreign direct investment (FDI) presents a diversified structure across a variety of industries shaping the future.”
Suppan supported his argument with data indicating that Hungary's exports of high-tech content and complexity rank among the world's best: 11th globally and 6th in Europe in terms of export complexity, 5th globally in the percentage of high-tech manufacturing, 9th in the export of creative products, and 10th in high-tech exports.
“Many would envy us if this signifies a failed re-industrialization,” the leading economist remarked pointedly. “We recommend that everyone should visit the factories to see for themselves how Hungarian industrial workers work in the most modern factories, which is a source of our pride.”
SUPPAN: HUNGARY TO REACH 90% OF EU DEVELOPMENT LEVEL BY 2030
Continuing, GKI criticized the government for apparently resorting back to a moderate inflationary economic policy due to limited maneuvering room without proposing a new economic strategy. Contrary to these critiques, national economist minister Márton Nagy introduced the government's new competitiveness strategy on Monday, stating that there is no need for an economic turnaround but rather a fine-tuning of the existing strategic goals and toolkit, Suppan retorted.
According to the expert, the primary goal for 2024, following successful inflation mitigation, is to restart economic growth. Hungary was severely affected by the energy crisis in Europe caused by the war, as it is reliant on imported energy. “We have started establishing solar farms and expedited the expansion of the Paks nuclear power plant. The government remains committed to its goal of reaching 90% of the European Union's development level by 2030,” Suppan detailed.
The ministry expects the Hungarian economy to rebound with a growth between 2-3% in 2024, reaching around 4% by 2025, indicating a recovery within two years.
Challenges ahead include restoring consumer spending growth, further increasing employment and activity rates, and maintaining and enhancing the level of investments. “In expanding exports and industrial production as part of re-industrialization, we aim not only to rely on foreign corporations but also enable domestic medium-sized enterprises to actively penetrate international markets,” Suppan emphasized.
To achieve this, the government aims to facilitate the creation of national champion companies through various programs targeting industrial sectors where Hungary has a competitive edge.
Suppan also addressed criticisms regarding the government's inability to stimulate the entrepreneurial sector, citing barriers such as budgetary constraints, the adverse consequences of forced interest rate reductions, and the risks associated with investment decisions.
"The recent cycle of interest rate reductions has by no means been forced," Suppan rebutted, highlighting the demand for lower interest rates from entrepreneurs and professional associations responsible for preserving jobs, which is critical for both survival and advancement.
In conclusion, despite GKI's concerns over a potential tightening of fiscal policy post-elections and the initiation of an excessive deficit procedure without sanctions, Suppan stressed the importance of reigniting and sustaining economic growth to ensure a manageable deficit reduction through increased tax revenues and automatic stabilizers. "Budgetary balance and economic growth go hand in hand," Suppan concluded, firmly opposing the return to failed austerity measures that could jeopardize the budding economic recovery.
Translation:
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Translated by AI
