The Hungarian Economy…

September 29, 2009 annay17

The Hungarian economy is facing a recession, which indicated by the contracting industrial productions and the growing unemployment rate.

However, the GDP does not truly reflect this, and is a false indicator of the condition of the Hungarian economy. Because there was a good agricultural season in 2008, there was a 50% increase in growth of the agriculture sector, and without that increase, there would have been a 1% contraction, as opposed to a 2% growth.

According to the article, demand management is not implemented properly, or implemented at all, as the taxes and interest rates are high, which dis-incents a firm, which has the potential to grow, and stimulate the economy, from spending and investing.

There have been policies implemented to decrease the interest rate, however, it may not have been enough, as it still is at 10.5%.

The government perhaps should take more aggressive measures to decrease the impact of the recession, through aggressive demand management, such as decreasing taxes, increasing government spending, and making fiscal policies.

Because it is predicted that the recession will continue on for the next year, it is probably not too late to implement ways to stimulate the economy. Although this will increase the government deficit in the long run, there is probably no time to spend waiting for the market to work itself. As the unemployment rate is still rising, there needs to be measures taken to help the people affected by the recession, or at least shorten the recession, to decrease the severity of it.