The Possible Causes of and Means of Avoiding External Financial Vulnerability – Hungary versus Singapore

Abstract

Difficulties in external debt-financing in the period since the financial crisis of 2008 have shed light on the financial vulnerability of the Hungarian economy. In this study our aim is to reveal the causes of external financial vulnerability, which can be incorporated into economic policy choices. We analyse the case of Singapore to demonstrate an example of those policies which can help avoid unnecessary financial vulnerability. External financial vulnerability is related to the quality of foreign accounts liberalisation, deregulation and privatisation, but in a wider context the direct and indirect public financing means which determine the global competitiveness of a national economy (educational policy, cluster management etc.) can be linked to it as well. Based on the analysis of Singapore’s related policies, the theoretical advantages of economic openness (such as export expansion, employment, management expertise, know-how and technology acquisition) can be achieved at a much lower lever of external financial vulnerability than what was experienced in Hungary. Singapore and Hungary are excellent for such a comparison as small, economically open countries which are among the most globalised ones based on globalisation indices.