How the crisis impacted Hungary?

Ferenc Karvalits, Deputy Governor of Magyar Nemzeti Bank in a superb speech explains how the crisis impacted Hungary.

The global environment is now characterized by (1) increased risk aversion as investors are trying to de-leverage their balance sheets, and (2) a shortage of liquidity as mutual trust within the financial sector has not yet recovered.

At the moment, Hungary is negatively affected by both these global phenomena. First, being an emerging economy, Hungarian assets are subject to the process of de-leveraging. Demand for these assets has decreased, and their prices have fallen. Second, as it is natural for an economy that is in the phase of catching up with its more developed peers, Hungary has been running a current account deficit, and is highly dependent on external financing. Concerns have emerged recently about how Hungary will be able to finance this deficit. Indeed, the global liquidity shortage and the resulting reversion of cross-border capital flows may make this financing more difficult.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.


%d bloggers like this: