Hungary and its region, in general, perform better economically and financially than Western Europe. Foreign investors more and more favour us; they ignore high politics. This is what Christopher Dembik the internationally acclaimed expert at Saxo Bank, who is also a well-known commentator on French television channels says. In the interview he gave us he is very positive about the region, however, he believes that it is important to warn Hungary that it would be a mistake if the country did not integrate highly trained immigrants into its economy suffering from a severe deficit of skilled labour.
Péter Zentai: Did it surprise you that S&P upgraded Hungary?
Christopher Dembik: I am quite confident that Hungary’s credit rating was unfair. The biggest credit rating agency should already have moved the Hungarian economy into a higher class last year because its productivity has been significantly improving. From our part, we believe that Hungary is one of the best targets for investments.
Despite the slowing down that we have been seeing for the last months?
The weakening was only temporal, which can be traced back to the complications in EU funding. We are anticipating serious and positive growth from Hungary and other central European national economies – even in the near future… This region of Europe outshines every other area. In contrast to Central Europe, the performance of Western Europe, including my home country France, and especially Southern countries, will weaker in the next one to two years. The financial crisis will deepen in Italy, Greece, and Spain.
How could Central Europe, Hungary in particular, achieve exceptional production if its primary partners, Western European countries are in crisis?
Firstly, your country’s government will soon come up with fiscal and economic stimulus packages. Secondly, Central Europe, including Hungary is in a financially stable situation – unlike other countries.
So our government will take steps for further stimuli?
This is the most likely scenario in your country – and as far as I know, it will happen in the coming weeks. There is also a good chance that Poland will also implement financial stimulus. Significant tax advantages are prognosticated in the corporate sector of both countries – soon there will be corporate tax cuts. These would have short-term invigorating effects, while on the long-term we are expecting that the structure of Hungarian, Polish, and other Eastern European national economies will improve in quality.
Do you take into consideration geopolitical uncertainties or that there is an escalating conflict between the leaders of European Union institutions and the leaders of certain Eastern European countries?
This is irrelevant to most investors – we do not regard such political issues as significant risks because these do not really change the way Hungary is seen from investors’ point of view. However, we do pay attention to the way Hungary takes care of its shortage of labour… Can it and is it willing to accept and host foreign labour; whether it is able to depoliticize this issue?
So far we experience its complete opposite…
Migration shall not be treated in a political context entirely. I do not doubt it would be a severe mistake and it would be an extreme source of social tensions if we hosted every refugee.
However, I am absolutely confident about that from an economic point of view it would be crucial for Hungary and the other Central European countries to host foreign labour. Not ‘selecting’ from refugees and not trying to integrate those who would be useful to operate and develop the Hungarian economy would also be a mistake. Sooner or later, there is going to be a competition between your country and Western European countries in this regard. Refugees who represent trained labour should have already be made interested in staying and working in Hungary – as it is in your country’s long-term interest.
Do you think that foreign investors and analysts content about Hungary? Do they not miss predictability and transparency in the government and the central bank’s policy?
This is still an existing problem. Investors do not really care whether you have debates with Brussels or not, or how free the media is in your country. The actions of central banks, however, are in the centre of attention of investors, and current problems will revolve around the transparency, predictability, and independence of national banks.
One thing that overshadows the positive anticipation towards Hungary – based on my experiences – is that the role of the government and the central bank in real economy is too big. Of course, financial and economic investors and analysts do welcome invigorating economic and monetary quantitative easing programmes from governments and central banks. However, if this central intervention goes beyond a certain line, it will raise suspicion among analysts and investors. I believe it would not be wise to risk the current trust and positive attitude.
Original date of Hungarian publication: September 16, 2016