Economic doldrums in Hungary?

Hungarian Prime Minister Peter Medgyessy sacked his finance minister this week. Csaba Laszlo was dismissed after last year's budget deficit turned out to be much higher than forecast. 2003 saw the Hungarian currency - the forint - lurch from crisis to crisis amid growing investor concern over big budget deficits. And rising inflation. The new finance minister, Tibor Draskovics, now has his work cut out to get Hungary's finances in shape in time for joining the Euro Zone - which Hungary says it plans to do in 2008. Sandor Laczko talked to professor András Inotai, the head of the World Economy Institute of the Hungarian Academy of Sciences and asked what's the outlook for 2004?

Csaba Laszlo, photo: CTK

"Based on the hopefully positive development of the western European economy, and not just the U.S economy, I do expect the external environment of the Hungarian economy to certainly improve. And also I think that the Hungarian economy will be able to make use of this improved external environment. Of course a lot depends on the economic policy, but although in the last few months there had been some painful re-adjustments - the consequences of which will only be felt in 2004 - I hope with these re-adjustments the economy will once again gain strength and will prove to be competitive in those areas which have created a competitive edge of the Hungarian economy in the last years."

Hungary officially becomes a member of the European Union on May 1st. Is this date going to influence in any way the development of the Hungarian economy?

"Not the date. I stopped speaking about accession dates of Hungary a year ago, when it became clear that Hungary would become a member of the Union on the 1st of May 2004. From this time on, I have always laid emphasis on what the preconditions are, the domestic tasks, of creating a competitive and successful Hungary within the EU. And there is of course still a lot to be done - not only before the 1st of May, but most probably in the coming years as well."

You mentioned the word 're-adjustment' earlier. Are there further corrections to be expected this year in economic policy?

"Yes, particularly on the budgetary side and also with respect to economic regulations. But the most important correction to be made is not an economic issue, but a much more political and social issue. The mentality of the population is something we have to invest much more in and finally stop the 'mental contamination'. The mental pollution of society. So the success of economic policy and the success of Hungarian integration into the EU to a large extent depend on non economic factors."