Can Hungary Expect a Recession in the Face of the Covid-19 Krach?

Besides the obvious medical concern of the covid-19 virus, the whole world is currently concerned about the potential economic effects. Supply and demand are being influenced at the same time, and experts are trying to weigh if a rapid and moderate downturn or a persistent recession is to follow.

Underlying global reasons

To determine the possible effects, one must understand how our economy is affected by the current pandemic. Ideally, the world economy is outpacing the epidemic with a mild first-round effect of supply and demand shocks. However, if the epidemic is prolonged, further unfavorable processes may occur. Prolonged uncertainty and deterioration in business confidence may reduce demand for consumption and investment, leading to a further, broader decline in economic performance. Disruptions in production and weak economic activities are destroying the stability of corporate finance, productivity growth is stalled, and lost revenue can drive debt-inducing firms into insolvency.

What can Hungary expect?

Mihály Varga, Minister of Finance has some pessimistic predictions. The originally expected 4% growth in GDP can now potentially be a 0.3% decline. The minister reports that economy-protection planning is ongoing, however, the government awaits the development of the crisis before enforcing such measures.

Prime Minister, Viktor Orbán, prefers not to comment on potential economic effects at the moment, as he believes presently the only priority is human life. Also, he does agree that economic consequences will be enormous, and the government will develop economic action plans that will help each sector individually since the economic downturn does not affect different sectors to the same extent.

Increased sales for remote working devices

Similarly to the rest of Europe, wherever possible, workers are advised to fulfill their duties remotely. This leads already to visible signs of increased sales of laptops. Laptop buying in domestic dealerships has been on the rise since the corona virus is spreading rapidly across Europe, and data shows that more and more companies are sending workers home to work.

In the middle of last week, corporate shoppers ordered between 5 and 10 of the same type of laptops.

Homeschooling for college students can also boost domestic demand, and it is not yet known what measures will be taken in the coming weeks, and whether secondary and elementary school students will be forced to stay home as in other EU countries.

Predictions

As the crisis is yet far away from ending, at the moment the only tool of experts is guessing and predicting. The nature and size of the shocks will be determined by the evolution of the Covid-19 virus. For the time being, there is a chance of the lightest output, a quick, short-term shock.

Sources:
https://www.origo.hu/itthon/20200313-orban-a-jarvany-elhuzodhat-ezaltal-megvaltozik-az-eletunk.html
https://hvg.hu/gazdasag/20200311_Varga_Akar_recesszioba_is_sullyedhet_iden_a_magyar_gazdasag
https://g7.hu/vallalat/20200227/erdekes-gazdasagi-kiserlet-indulhat-ha-magyarorszagon-is-megjelenik-a-koronavirus/
https://www.portfolio.hu/gazdasag/20200302/hoz-e-a-koronavirus-gazdasagi-valsagot-417659
https://index.hu/techtud/2020/03/12/tizesevel_viszik_a_magyar_cegek_a_laptopokat/

Bence Varga