Well this debate rumbles on. Today Hungarian Prime Minister Ferenc Gyurcsány warns that if the referendum were held and the opposition view of Fidesz and the Christian Democrats (KDNP) won, then the lost budget revenues would need to be compensated either by withdrawing money from other areas or via tax and contribution hikes.
Let us remember the key issues are these:
The court said three questions asking whether Hungarians agree to revoke as of Jan 1 co-payments for doctor's visits, hospital stays and tuition fees at state universities can be put to a referendum.
This debate has started to warm up during the very week that Standard & Poor's argue that Poland, Hungary, the Czech Republic and Slovakia are suffering from reform fatigue:
None of the four Central European EU countries feels enthusiastic about continuing budget consolidation, as the political atmosphere is hostile and the population is exhausted by reforms. “Political unwillingness or inability to tackle structural reforms and further consolidate public finances could limit improvements in credit quality of the four largest Central and Eastern European countries (the CEE-4),” Standard & Poor's analysts wrote in a report titled “Reform Fatigue Clouds A Brighter Outlook For Central European Sovereign Ratings.”
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Thursday, July 05, 2007
Ageing, Opportunity or Challenge?
The world bank has a short article on ageing in Hungary, entitled Hungary’s Aging Population – A Challenge as Well as an Opportunity. Actually I think the World Bank highlight the problems reasonably well, but at the same time they may underestimate the difficulties involved in looking for solutions. In the short term I still feel that facilitating inward migration is very important, but first, of course, Hungary needs to stabilise the current economic issues she has.
Points of note in the article are:
In the first 25 years of this century, Hungary is slated to lose 8 percent of its population. The proportion of the population over 65 years of age will increase by 40 percent by 2025, so that more than one in every five Hungarians will be over 65. If this dramatic aging is not managed effectively, it could knock Hungary off the path of converging with Western European economies and it could jeopardize plans to meet the requirements for joining the Euro zone.
Indeed, the demographic transition in the former Eastern bloc has not hit the headlines as much as the political and economic upheaval since the late 1980s but still is a transition that may be just as far-reaching.
This “third transition” is the rapidly aging of the 400 million people who live in these former socialist countries. All 27 of these countries will have a significantly higher share of people over the age of 65 in 2025 than they had at the turn of the century. During the next two decades, they are projected to see their total population shrink by almost 24 million people, with Russia alone standing to lose 17 million and Ukraine another 12 million. These projections are dramatic but what really makes the situation unique is that Hungary and its neighbors to the east must deal with the impacts of aging in a much more challenging environment than its neighbors to the west. No other rapidly aging countries in the world are still in the process of developing mature economic and political institutions. And it is unique precisely because – as in Hungary – the process of demographic transition is accelerating even though the process of economic transition is far from complete.
The overlapping of the demographic transition with the incomplete economic transition thus has the prospect of altering the socio-economic fabric of Hungary and its neighbors. They run the risk of ballooning public expenditures, as historically large pension obligations mount with aging populations, and as institution-based elder care systems demand more and more public resources. These societies also face a growth challenge, as the working age population shrinks and aging individuals potentially save less.
There are two straightforward policy solutions – even discounting immigration, which may be an important factor, but socio-politically challenging. The first is increasing the participation rate of those who are of working-age population today. ......... But a second route is even more powerful – improving the productivity of those who are in the workforce. To do this, Hungary will need to commit to a range of farsighted reforms – in improving education, including adult education and lifelong learning, and in ensuring that the investment climate will encourage the creation of new innovative firms and improvement in the productivity of existing enterprises.
Points of note in the article are:
In the first 25 years of this century, Hungary is slated to lose 8 percent of its population. The proportion of the population over 65 years of age will increase by 40 percent by 2025, so that more than one in every five Hungarians will be over 65. If this dramatic aging is not managed effectively, it could knock Hungary off the path of converging with Western European economies and it could jeopardize plans to meet the requirements for joining the Euro zone.
Indeed, the demographic transition in the former Eastern bloc has not hit the headlines as much as the political and economic upheaval since the late 1980s but still is a transition that may be just as far-reaching.
This “third transition” is the rapidly aging of the 400 million people who live in these former socialist countries. All 27 of these countries will have a significantly higher share of people over the age of 65 in 2025 than they had at the turn of the century. During the next two decades, they are projected to see their total population shrink by almost 24 million people, with Russia alone standing to lose 17 million and Ukraine another 12 million. These projections are dramatic but what really makes the situation unique is that Hungary and its neighbors to the east must deal with the impacts of aging in a much more challenging environment than its neighbors to the west. No other rapidly aging countries in the world are still in the process of developing mature economic and political institutions. And it is unique precisely because – as in Hungary – the process of demographic transition is accelerating even though the process of economic transition is far from complete.
The overlapping of the demographic transition with the incomplete economic transition thus has the prospect of altering the socio-economic fabric of Hungary and its neighbors. They run the risk of ballooning public expenditures, as historically large pension obligations mount with aging populations, and as institution-based elder care systems demand more and more public resources. These societies also face a growth challenge, as the working age population shrinks and aging individuals potentially save less.
There are two straightforward policy solutions – even discounting immigration, which may be an important factor, but socio-politically challenging. The first is increasing the participation rate of those who are of working-age population today. ......... But a second route is even more powerful – improving the productivity of those who are in the workforce. To do this, Hungary will need to commit to a range of farsighted reforms – in improving education, including adult education and lifelong learning, and in ensuring that the investment climate will encourage the creation of new innovative firms and improvement in the productivity of existing enterprises.
Monday, July 02, 2007
Industrial Production Continues To Rise
Portfolio Hungary has this:
Following a fall in May, Hungary's manufacturing industry has apparently found its footing again in June. While the PMI plummeted to 51.5 in May from 57.6 in April, the seasonally adjusted indicator rose 0.7 percentage points m/m to 52.2 in June, the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM), the publisher of the index, reported on Monday.
Now as they also note an index figure above 50 indicates expansion while a figure below 50 shows contraction in economic activity. So let's look at the graph to see what has been happening.
What we should note here is that since the Jan-March quarter 2005, industrial output has been expanding steadily. In February this year the rate of increase of output accelerated rapidly, then fell back. In May it seems to have touched bottom (since in that month it barely grew at all), and this month the expansion rate has rebounded ever so slightly. Where we go from here at this point is anyones guess, since there is no clear trend, but I would expect the expansion to continue, at least for the time being, since if it didn't, well we would be in a mess, wouldn't we.
Following a fall in May, Hungary's manufacturing industry has apparently found its footing again in June. While the PMI plummeted to 51.5 in May from 57.6 in April, the seasonally adjusted indicator rose 0.7 percentage points m/m to 52.2 in June, the Hungarian Association of Logistics, Purchasing and Inventory Management (HALPIM), the publisher of the index, reported on Monday.
Now as they also note an index figure above 50 indicates expansion while a figure below 50 shows contraction in economic activity. So let's look at the graph to see what has been happening.
What we should note here is that since the Jan-March quarter 2005, industrial output has been expanding steadily. In February this year the rate of increase of output accelerated rapidly, then fell back. In May it seems to have touched bottom (since in that month it barely grew at all), and this month the expansion rate has rebounded ever so slightly. Where we go from here at this point is anyones guess, since there is no clear trend, but I would expect the expansion to continue, at least for the time being, since if it didn't, well we would be in a mess, wouldn't we.
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