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Did the predictions turn into unfounded guesses, predictions? I don’t see it that way. Regarding the forecast of economic processes, the analytical community quite well described the direction of trends on the basis of the acquired and constantly growing knowledge of the epidemic, and gave an estimate of production, price level and budget position. with acceptable accuracy since last spring. Rather, there was a systematic problem with the official data: you could feel that we were trying to manipulate expectations with irrationally optimistic statements, ignoring the obvious factual situation.
However, the business decision maker should not be deluded, nor can it be very.
From the development of orders, market prices and billing data, the companies were able to see what the concrete facts are, regardless of what they forecast about the national average and its favorable evolution.
Uncertainty
However, a forecast must be given in such a situation, even in such plastic conditions, since each company, institution, family needs some framework to plan its operation. But it does not matter what the basis and purpose of the forecast is. The politician plunges into the crystal ball and sees a promising future. Even now, we hear the bright years awaiting the Hungarian economy, let’s get over the current problems. This rhetorical twist, as well as the staging of the ten years left behind as a historic success, should be seen for what it is: a political public relations tool. At the same time, the calculations of the research sites working with professional gadgets are realistic, but, now more important than ever, conditional, since
Critical turning points can occur in the economy, but especially in the non-economic world.
Anyone who now gives a forecast that gives the appearance of certainty is certainly ignoring political risk factors, non-economic factors and the reaction of society that is still unknown today. In other words, all the reasons why the Hungarian economy achieved economic growth in 2020 were not plus 4, but roughly minus 6 percent.
In the forecasts of international organizations and national research institutions and institutes for 2021, Hungary is similar to most of the countries in the region: This year, the economic recession suffered last year can be partially addressed. Today, we don’t even have real data for 2020, but the decline in GDP may be around 6 percent, for which the average growth rate for this year will be measured. There are institutions, such as the MNB, that give two values: the December 2020 inflation report expects growth of 3.5% and 6%, respectively, which are actually two separate worlds, but at least two different scenarios. Kopint-Tárki forecasts a 3.5 percent increase from last year’s base of minus 5.8 percent, while GKI forecasts a 3.7 percent rise to 6 percent last year. Our estimate within Corvinus University projected (even based on summer data) projected an increase of 4.5 percent this year to minus 6.1 percent; This appears to be somewhat more optimistic than other forecasts, but projects more modest growth than others for next year.
Base effect
The differences are not small, but if the director of a company or institution draws up his annual plan according to his actual circumstances, then half a percent of macroeconomic growth is not important to him. The message from the data is unanimous that this year’s average indicators will be better than last year’s national average. But… But on the one hand, there is nothing unexpected about this. After March 2021, production and employment data will improve exponentially, even if there is no phenomenal change in the state of the economy from March to April.
Put simply, the second quarter database will be the second quarter slowdown suffered during the big slowdown in 2020 – the second three months of 2021 will certainly outperform compared to that.
What will happen next is quite uncertain for any serious analyst, although it can be rightly assumed that economic actors, who have already survived the crisis, are operating within their capacities to adapt to the new conditions.
On the other hand, to follow the usual turn of the economists: most of the current analysis portrays the reality that the level of production, national income can only rise slowly, and perhaps only by the end of 2021 will the deep moat that caused the Covid crisis. formed during.
U V W? None of them! This is k!
The expected situation seems to have been assimilated by the business world and perhaps also by the general public. More important, however, are the structural consequences of a “slower than expected” regeneration. One of them is the recognition that, in times of crisis, the average number does not say much. Many times and many have said that in the shape of a U or V, we remember the alphabet debate, the economy is returning to pre-crisis levels.
But not everyone follows the trail of U or V, not even W. That is why we are increasingly talking about K-shaped restoration:
The big shock of 2020 will be followed by a lasting regression in half of the companies and sectors (this is the return terrain of K), while in the other half the economy will be booming after the initial recession, this is shown in the upper right line of the letter K.
In fact, it is clear from the history of crises that some do better, others worse than others, and the post-crisis world will not be the same for everyone. It also follows that economic policy should not finally deal with half the economy, because there will be, on the track, but there will be, even with satisfactory averages, sectors in a difficult situation.
Reserve training
Where competition and the market function, it is fundamentally market processes that decide success and lasting backwardness. Great transformations are taking place in the world, in Europe. It seems to us that not all companies survive the great downtime, the spring hibernation. They are not the same companies and will not do the same in the spring and summer of 2021 as the ones that were hit in March 2020. It would be a big mistake, but neither would the budget force the government to pursue micromanagement, pressuring the successful and protecting immediately to the troubled.
On the other hand, a reserve must be formed because the lower right branch of K going down embodies serious social problems.
Consequently, it is not necessary to spend all the mobile resources and EU money as soon as possible on the government’s pet projects, based on the professions’ argument of “keeping demand in the national economy”. If the last year has taught a serious lesson about something, it is the occurrence of quick turns and unexpected events: so let’s stay in reserve, let’s have a chance to react.
Coffee grains
And yes, coffee grounds. Not as a divination technique, but as a reminder of the importance of home consumption. Now it can truly be said that there has been a global recession (with the exception of China and some special regions) that has suddenly changed lifestyles. Daily consumption is fairly stable, but the household savings rate has skyrocketed, even among famous Americans – car purchases and travel intentions are delayed, the middle class is sidelined due to uncertainty. As a result, consumer demand in most countries will certainly remain subdued this year, and price stability will be maintained. This year, the low level of interest rates, the abundance of credit, will persist even if the big central banks stop the practice of aggressively increasing the amount of money.
However, the situation is different in Hungary: inflation did not stop during last year’s recession and our rate of deterioration of money remains uncomfortably high compared to an economy that is performing below the potential level of production.
It mainly affects those who are suffering the most from the economic downturn, the prolonged crisis, anyway. Those with the smallest financial reserves are likely to have inflation around their necks as a sneaky tax. Yes, crises exacerbate social tensions and will not ease even if Treasury optimism intensifies in the face of a sudden improvement in macroeconomic data. There is no reason to know the data and the processes behind it.
This article reflects the opinions of the authors and does not necessarily reflect the opinions of the Portfolio Editorial Committee.
If you would like to comment on this topic, please send your comments to [email protected].
The Opinion section of the portfolio, On the other hand, has been launched. We wrote about the column here, and the published articles can be read here.
Cover image: Getty Images
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