The Hungarian economy, set to expand at around 4% both last year and in 2005, is back onto a sustainable, export-led, growth track

The Hungarian economy, set to expand at around 4% both last year and in 2005, is back onto a sustainable, export-led, growth track. Inflation, which spiked last spring at 7.6% due to one-off tax increases incurred from joining the European Union, will drop to around 4.5% next year, and although more effort must be put into cutting government spending, the budget deficit will drop to 4.7% of GDP in 2005, from 5.3% this year. It is true that many mid-sized exporters are having trouble, but that is due to the strong forint, and that is because the central bank has maintained interest rates too high for too long. Still, with unemployment at 6.1%, many countries in "old" Europe are envious of Hungary's position. That, more or less, is the finance ministry's comfortable and comforting - view of matters. It could hardly be more at odds with that of central bank governor Zsigmond Járai, who told Hungarian Radio on Sunday that debt was at "1995 crisis" levels and it was only the country's EU membership that had staved off economic disaster. "The Hungarian economy would probably have already collapsed due to the current unsustainable political-economic path, if the country had not been a member of the European Union," Járai said. Speaking to Vasárnapi Újság, a Sunday morning program much criticized by Socialists and Liberals in recent years for airing what they term far-right views, Járai added; "I don't think creditors would tolerate such a high debt level if we weren't a member of the Union."