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Hungarian report Hungarian report
by Euro Reporter
2011-10-29 09:32:56
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Hungary may have to bridge IMF rift as bond noose tightens

Hungarian Premier Viktor Orban may have to abandon his policy of shunning the International Monetary Fund as his “unorthodox” measures contribute to the European Union’s second-biggest default-risk jump behind Greece. Hungary, whose rating is being reviewed for a possible downgrade to junk by Moody’s Investors Service and Standard & Poor’s, would improve its financing capacity by gaining access to IMF funds, Bank of America Corp., Morgan Stanley and UniCredit SpA have said in the past month. The government yesterday failed to sell 12-month debt at an auction.

“I’d be surprised if they could now suddenly pull someone out of the desert that hasn’t paid attention in the last 10 years that there is a bond market in Hungary,” said Gyorgy Jaksity, chairman of Concorde Securities, Hungary’s biggest non-bank brokerage. “If we can’t finance ourselves from the market, then only the multilateral institutions will be left, such as the European Union and the IMF.”

Without the Washington-based lender as a backstop as Europe struggles to insulate economies against debt contagion from Greece, Hungary is seeking to convince sovereign wealth funds from China, Russia, Norway, Saudi Arabia and Kazakhstan to become long-term investors in its local bond market. The country is also mulling sales of Islamic and Russian-rubble debt.

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Hungary unemployment rate eases to 10.7%, participation rate at new record in Q3

The number of employed people in Hungary was 3.856 million in the July-September period of 2011, some 33,400 more than in the base period, and also up by some 51,600 from the last quarter of 2010. The rate of unemployment dropped to 10.7% in the third quarter (462,000) from 10.8% in June-August, the Central Statistics Office (KSH) has reported on Friday.

What stands out in the statistics is that the participation rate of the population aged 15-74 rose further to 56.3%, which has been unprecedented at least since 2001 (Portfolio.hu's database goes back that far).

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Hungary needs independent institutions to enforce measures

Hosting key local and international policymakers to discuss the economic outlook for Hungary and worldwide, Portfolio.hu's Budapest Economic Forum conference is taking place today at the Sofitel Budapest Chain Bridge Hotel. The event is taking place against an exciting background of Wednesday's Council of Europe summit on managing the Eurozone debt crisis. The overall worldwide economic climate and its impacts on Hungary, such as global uncertainties, the threat of further downgrades or forint volatility provide plenty of food for thought and subjects of discussion.

"Over the past three years Hungary has undergone a classic emerging market crisis, while areas which had earlier been prime targets of such crises (e.g. Central or South America) were much less afflicted this time," Governor of the National Bank of Hungary András Simor said in his keynote speech at the Budapest Economic Forum. "The key reason for this is that the latter have successfully found a way to fix the procyclical nature of fiscal policy which had been the norm for several decades."

A common feature of emerging market crises is that the countries affected had accumulated significant external debt, the bulk of which was denominated in foreign currencies. Prior to the crisis, these countries followed a typically procyclical economic policy, with practically unlimited access to foreign capital. When a crisis hits such a country, the trend suddenly turns around and governments are unable to handle the situation. A lack of room for fiscal manoeuvre means fiscal measures are not available to help the country get out of the trough, Simor explained.


       
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