EC finds macroeconomic balances in need of action in Hungary


The European Commission named a number of macroeconomic imbalances in Hungary which are “in need of decisive policy action” in a report published. The EC said several of Hungary’s indicators in its latest Macroeconomic Imbalances Procedure Scoreboard were “beyond the indicative threshold”, namely its net international investment position, losses in the market share of exports, government debt and the unemployment rate. Hungary’s net international investment position has declined because of increasing current and capital account surpluses, but “remains very high”, the EC said. It noted that the improvement in the current account had, until recently, been driven mainly by weak domestic demand, as exports were “generally weak”, resulting in large accumulated market share losses. The EC said private sector deleveraging had continued “in a difficult context” with a high level of non-performing loans, an “excessive burden” on the financial sector, negative credit flows and a continuous decline in inflation-adjusted home prices. The EC acknowledged a gradual but continuous decline in general government debt, but said the trend was “not robust enough” considering the possibility of adverse shocks. The EC said Hungary’s labour market activity rate was on the rise, but continued to be one of the lowest in the European Union. Poverty indicators for the country “have continued to deteriorate substantially”, it added. Hungary was among 16 member states in which the EC found that further analyses of imbalances were warranted.