As my professional background is economics of course that this area touch me the most, despite of that that historic and cultural sites of Hungary made me addicted to further explore about the history of this country and the glory that the country has.

As I said in the beginning “debts, loans and money” and politics is a hot topic almost everywhere, in media, among friends and so on. And exactly around these things I will give my opinion and express myself how I observe as a foreigner and of course from my stand point of view.

First thing that I do not like in Hungary is banking system (why I say this, because I worked two years in Bank in my country, I did international banking and I have a lot of knowledge on banking’s). I know that Banks does business for profit, the first principle is “give papers to people in order to collect money from them”, but is not here my point.

My point is that in Hungary the banking system is the most expensive one I ever heard in Europe and definitively this impacts the Hungarian family and overall speaking the Hungarian nation. I know also that bankers protect themselves behind the free market theory where the people takes own decisions what they buy, what they sell, what loans they take and so and so on, but pushing Hungarians to take so much loans in foreign currency (i.e. CHF)… for me, a big responsibility remains with bankers and the political leadership as they must have known where all these things will end up (at least they should have done the so called worst scenario analysis and share with public).

Anyway, why I do not like banking system here I will illustrate with one simple example: I did some analysis on loans for some of my friends and after calculation it turned out that during the loan life for their apartment they pay back to the bank an amount of money that will buy two more apartments for the bank while will remain one for himself. The other odd thing is the big difference among interest rate on free deposits and the interest rate on loans given by the banks.

Let’s say I deposit 1M HUF with the bank and they give us 5.5% - max8% depending on timing of the deposit, then the Bank can give this 1M HUF to another individual with interest rate 25 – 35% and even you can see these advertisements from the banks as “kedvezmeny” that means discounted offer!!!. This leads to the situation where the poor is financing the rich and in macroeconomics this is so called capital concentration and simply does not help the economy to grow. This banking system is absorbing all financial capital and not leaving real money in the hands of citizens and therefore “killing slowly” the demand side in the market.

Touching the phrase “growing economy” someone can say that the statistics are showing GDP growth and that can be true, but comes the question where the growth is? And the growth is only for few people and is only a quantitative growth for sake of statistics and does not help the country to boost the economy to a sustainable level. When we speak nowadays about GDP growth is better to be focused on a qualitative growth where overall nation is impacted positively by that growth.

Other thing that does not help the economy to grow is the fiscal policy very complex and not in line with other countries in area of economic competition and with this I mean that taxation is higher here than in other countries around, making Hungarian economy to be not competitive. Sometime taxation seems to have a small difference but in the free market economy also small things matters when it comes to competition.

I know that Hungary has a big sovereign debt around 75% of the GDP, but even with that there should be a way out to adapt the policy in order to be competitive. There is a saying: “a good sailor cannot change the direction of the wind, but can adjust the sails to always achieve the destination”, therefore adapting the policies to the reality is an imperative for the leaders of any country.

And when we speak about adapting the policies we touch the politics and giving my opinion on this I will close this short view for this time. I will start with a quote “law is done for people and not the people for law”, with this I mean we all have to respect the law in the way that is intended to be. Humans do errors and so do the politicians. The good thing in this system that we live, is that when politicians do errors then they are punished when the elections comes.

This happened also here with previous government and they lost very badly in the last elections. While current government (that my Hungarian pals calling simply as OV, meaning Orbán Viktor) is trying to repair the damage that has been done to the Hungarian people due to bad decision making in the last 10 years or more. In order to do this OV is taking tough actions (including Constitution Changes.

So the law is done for people and has to be changed when is necessary in order to do reforms) and because of this there are critics accusing him for creating a state of dictatorship, what I simply disagree. I personally think that OV has a good intention to promote necessary changes, but also is not an easy thing to do a change that will impact positively and immediately everyone.

The biggest critics of OV are people who were in power for 8 years and brought this country in a very bad situation economically and financially. Critics are good in democracy, but the ones who criticize must have also a better alternative for the people.

To conclude I would say that to improve the economy of this country is a need to:

a) improve the banking system by pulling down the interest rates to similar level as in West Europe,
b) simplify the fiscal policy in order to be competitive,
c) controlling more the “black” economy
d) setting limits for public debts and having a real strategy to reduce the current public debt and the last one but not the least to improve and “relax” relations with IMF and European Union in order to keep the balance on the international market and absorb foreign investments.

By doing this Hungary will adjust the sails to achieve the wanted destination, a prosperous country. Hajra Magyarorszag!

Driton Smakaj
Author is Master of Science in Economics

His opinion does not necessarily represent the views of this portal, your feedback is welcome.