Crisis management in Hungary – Theoretical analysis

Abstract

Hungary is currently burdened with crisis, in fact with several types of crisis. The economic crisis has unfolded after the global economic recession, triggered by the international financial crisis, reached Hungary. This is a natural consequence in a country where the export-import ratio accounts to 70 percent of the GDP. In addition, the country must overcome a serious financial crisis, which in part can be attributed to the financial crisis evolving in the international arena. In a financial crisis lenders are always cautious. They place the debtors' solvency under greater scrutiny, and countries burdened with economic and payment problems are given loans only at more stringent terms and conditions, if at all. This can also lead to a decline in production, since in such a case the decrease in imports, which are indispensable for the economy, may also trigger a drop in the GDP. In the absence of loans imports may plunge, and may bring economic performance down, too. This problem primarily affects countries that are heavily indebted, whose level of development is intermediate at best, and whose public finance balance has been negative for a longer period of time. The Hungarian economy is characterised by especially these features. On top of all this, the problem is not only that Hungary cannot evade the global financial and economic crisis in a globalising world economy, but also that due to its internal and external balance situation, Hungary is very much exposed both to economic and financial crises.