Weeklies on inflation and the Forint

Weeklies across the political spectrum ponder the causes and possible remedies of steep inflation and the weak Forint.

In Magyar Demokrata, Sándor Szarka blames the drastic weakening of the Forint on European Union pressure on Hungary and speculation against the Hungarian currency. Szarka recalls that the Hungarian Forint weakened to 416 to the Euro last week, a historical low, from 360 in March, and lost far more than other regional currencies. The war in Ukraine and resulting energy crisis do not fully explain the Forint’s plight, Szarka contends. He goes on to speculate that what he calls the European Union’s hostile behaviour and ‘economic struggle’ (procedures against Hungary and the suspension of the country’s access to EU funds) encourage speculators to bet against the Forint. He is optimistic, nonetheless, that following the Hungarian government’s recent gestures, indicating its willingness to meet EU requirements to access EU funding, will soon stabilize the Forint.

According to Heti Világgazdaság Hungary may soon face a crisis resembling that of the Turkish lira or various South American currencies, compounded by an inflation crisis, unless the government makes a U-turn. The liberal weekly lambasts the government’s economic policies as well as the National Bank’s insistence on low taxes. High government spending and loose monetary policies have fuelled inflation and weakened the Forint, Heti Világgazdaság suggests. The weekly admits that the government has announced huge spending cuts, but at the same time, it will spend a lot more on communications, the military and sports. Taken all together, Heti Világgazdaság is less than confident that the government is committed to revising its economic path, despite high inflation and the weakening of the Forint.

In an interview with Magyar Hang, the economist András Inotai deems it likely that the government’s recent restrictions and tax hikes (see BudaPost June 14) will further fuel inflation. He thinks that the government’s decision to limit access to subsidized household energy indicates that the budget is in complete ruin, in the absence of EU funding. Inotai speculates that the austerity measures recently announced may lead to the swift decline of the government’s popularity. He suspects, however, that the government would behave like Latin American authoritarian regimes, to stay in power even if their public support dissipates.

In Élet és Irodalom, István Tömpe blames high inflation on the government’s spending spree before the April Parliamentary election. The liberal columnist acknowledges that external factors also contribute to inflation, but sees the loose fiscal and monetary approach of the government and National Bank as the main explanation of skyrocketing prices. As Hungary’s access to EU funding is suspended, the government has run out of sources, and Hungarian families as well as companies impacted by price controls are facing huge economic difficulties, Tömpe contends. He adds that Hungary is unlikely to catch up with Western Europe any time soon. He also finds it sad that the opposition cannot use the opportunity and instead of sending strong and convincing messages to voters, still spar with each other and try to outbid the government’s social welfare promises.

On Mandiner, Géza Sebestény, analyst of the pro-government think tank Matthias Corvinus Collegium predicts that the inflation rate will further increase when price caps are abolished. He contends that the inflation rate spike after the termination of price controls is clear proof that price limits, and most importantly the price cap on fuel, significantly help Hungarian families as long as they are in place, and prove wrong their critics who claim that they are of no use.

Tags: economy, Forint, inflation, restrictions