Hungary may lose Ft 1.62 trn as political unrest damages economy
Thursday, October 5, 2006, 13:12
Hungary is in talks for investment worth Ft 1.62 trillion ($7.5 billion), which may be lost because of the instability, Economy Minister János Kóka said today. The amount of money already lost in canceled hotel rooms and conferences has reached €1 million ($1.3 million), he said. Prime Minister Ferenc Gyurcsány has called for a vote of confidence to underscore his mandate to govern in the face of calls for his resignation. „Hungary's international reputation suffered serious damages in the past few weeks,” Kóka said at a press conference in Budapest. “This was caused jointly by those who burned cars and those who tried to otherwise destabilize the country.” The opposition's calls for Gyurcsány’s resignation and their urging for the government to cancel its austerity program are also damaging the economy, Kóka said. The measures are aimed to control Hungary's budget deficit, the widest in the European Union. International companies, including General Electric Co. and Suzuki Motor Corp., that have invested more than $65 billion in Hungary within the past 17 years, may also reconsider their investments, Kóka said.
„The strategic investors that are already here are waiting on the sidelines to see if this insecurity will end within days or weeks,” he said. „This is about whether these companies will reinvest their profit generated in Hungary or if they will chose to take it to other countries.” While bond and currency investors are unlikely to sell their holdings, the increased instability may force the central bank to further raise its benchmark interest to keep Hungarian assets attractive, according to Kóka. The country's main interest rate is already the EU's highest at 7.75%. „It can cost the majority of the savings from the austerity measures if the destabilization has to be offset with rate increases,” he said. Regardless of the events, Kóka reiterated that the government will carry out the budget plan as approved by the European Union. (Bloomberg)