Economist Victor Zsedy looked at the Hungarian economy and saw a textbook example of hyperstimulus unfolding at the end of the cycle.
Inflation explodes, lowering household real incomes, causing household consumption to collapse, which “unexpectedly” leads to a major economic slowdown.
– said the economist in his analysis. He pointed out that the government is unable to help due to excessive economic stimulus in previous years, as there are not enough reserves.
According to Zsiday, the implementation of budget cuts exacerbates the situation, as these measures often lead to further slowdowns. It also indicates that as a result of the current economic slowdown, tax revenues will be low, which will require further tax increases or spending cuts, and possibly debt.
It certainly seems like the money has to come from somewhere, and the burden on companies isn’t necessarily enough to do that, so if I had to guess, I think the high earners are going to have to get involved in some way to fund it.
– Zsiday thought. According to the economist, a tax increase is likely to be the next step aimed at financing the budget deficit. It also proposes raising the corporate tax rate to 15 percent.
According to Zsiday, the budget must be re-planned
According to the analyst, the budget will need more than 1,000 billion forints, and based on the data of the past few weeks, it will be necessary to revise the 2024 budget.
The possibility of cutting spending is becoming more and more difficult, especially since the quality of public services is already deteriorating due to layoffs, and public servants have already suffered a serious decline in real wages.
– Zsiday stated. He added that the problem could be dealt with through debt, but the possibility of this happening is questionable due to our “serious relationship” with the European Union. He considers it worrisome that other unfavorable economic data could scare away the capital that currently finances us, which could lead to a “more serious forint drop”, which is why, in his opinion, going into debt is not an option.
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