Policy mistakes, economic downturn and corruption
The deterioration in Hungary’s economic performance is closely linked to policy failures. Under the MSZP-SZDSZ government, the economy was characterised by loose fiscal policy and indebtedness after accession. Although many infrastructure investments were made, the 2008 financial crisis severely set back the country’s performance. A EUR 20 billion loan from the EU and IMF saved the country from bankruptcy, but recovery has been slow.
After 2010, the Orbán governments adopted an unorthodox economic policy stance that initially dampened growth. Later, growth was artificially stimulated by the central bank and the government pumping large amounts of money into the economy, which produced short-term results but led to higher inflation and structural problems in the longer term. An industry-led economic policy, with a focus on low-value industrial production rather than high-value-added innovation, has also contributed to the regional backwardness.
Corruption and the lack of rule of law have exacerbated the situation. The Orbán governments have often used EU funds inefficiently and established a system of patronage. Rampant corruption has led the EU to suspend a number of EU funds, costing the country billions of euros. In recent years, these policies have not only alienated foreign investors, but also Hungarian businesses, and a growing number of Hungarian businessmen have voiced their criticism of economic governance.
The future
The future of the Hungarian economy depends on fundamental reforms. Restoring the rule of law and fighting corruption are essential to regain access to EU funds. Meeting the conditions for euro adoption can provide a stable anchor for a new economic policy aimed at sustaining growth and improving competitiveness. Without the promotion of free competition and the development of high-value-added sectors, the Hungarian economy could remain trapped in middle-income countries.
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Publish date : 2024-12-30 21:34:00
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