Essay on Hungary Economic Crisis

1672 Words7 Pages

Case Report: Hungary Economic Crisis and a Shift to the Right

Angula DiCaprio

Business Economic Analysis

6 August 2012

Executive Summary 3

Problem Identification and Analysis 3

Floating of the Currency (Forint) 3

A shift to the Right 3

Feud with the IMF 4

Crisis Taxes 4

Renationalisation of Pensions 4

Governance 5

Monetary Policy and Central Bank Independence 5

The Media Law 5

Loophole Legislating 5

Statement of Key Problems 5

Hungary had two major problems, namely: 5

Political Climate 6

A Shift to the Right 6

Governance and Legislation 6
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The floating of the Forint had caused the Hungarian GDP to drop to 6.3% and unemployment reached 10% in 2009.

A shift to the Right

After election of June 2009 and a change in government, the Hungarian policy think-tank which represented 21% of Hungarians sympathised with the radical-right’s values and ideologies. The right wing government had launched attacks on perceived enemies both inside and outside of Hungary through tightening immigration laws, using anti-minority to build political support.

Crisis Taxes

After the government agreed to meet EU deficit goals, Fidesz generated revenue through the referred “crisis taxes” on banking sector, telecom, retail, energy, and pharmaceutical sectors, which were planned for 3 years. Three months after the crisis taxes were passed, 15 multinational and local firms had started to campaign against those taxes and threatened to cancel future investments in the country.


Monetary Policy and Central Bank Independence

During the economic crisis and subsequent recovery, Hungary’s central bank gradually cut its target nominal interest rate from 11.5% in 2008 to 5.25% in 2010. After the economic conditions improved, the government introduced its new expenditures, whereby the central bank responded by increasing its prime rate 3 times over the next 9 months in 2010. However, the government
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