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Former finance minister on Covid impact

August 31st, 2020

A former Socialist finance minister warns of the unforeseeable consequences of a second wave of the coronavirus pandemic.

In Magyar Narancs, fiscal policy expert Csaba László, who served as Minister of Finance under Socialist Prime Minister Péter Medgyessy from 2002 to 2004, predicts that third quarter figures will be much better than the 13 per cent slump reported after Q2. In fact, energy consumption in June and July approached last year’s levels. Nevertheless, he finds the international impact of the coronavirus pandemic worrisome, with infection levels rising in the Western world and with a substantial number of developing countries struggling to manage the health crisis. He doesn’t exclude a new record-level wave of migration from south to north. Meanwhile, central banks are pouring unprecedented amounts of money into national economies. As a result, stock exchange quotations are rising, despite no improvement in fundamentals, which might one day result in a new financial crisis. Hungary is extremely sensitive to the state of foreign markets and therefore it is impossible to predict even the short-term future of the Hungarian economy, he believes. In the longer run however, László suggests that Hungary must prepare for a long period of slow growth or stagnation, although he suspects that the government will try to speed up GDP growth before the 2022 elections. Nevertheless, if a second coronavirus wave does impose another lengthy lockdown on Hungary, the government might find itself compelled to ask for an IMF bailout, which would not come without conditions. That is something the government will do everything to prevent, because the last thing the Prime Minister would like, László concludes, is to find himself dictated to over political and economic conditions.

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