Development and Finance from issue 2009/2

György Mikósdi

The Financial Crisis and International Trade

- Abstract -

JEL F-13, G-01

Hungary has made laudable progress in the process of globalisation and European integration so far; however, due to the openness of its production and trade structure and inappropriate economic policy it has become extremely vulnerable. In the strategic sectors of industrial production, foreign parent companies have started to scale back their activities in Hungary first, and this triggered a significant decline in employment. The severe burden on the national economy is that the main contributors to GDP are freezing their production capacities one after another, just in the short term for now, but who knows how long it will last. Hungarian small and medium-sized enterprises which used to participate in export sectors have been equally struck by the diminishing demand and lack of financing. Hungarian exports are hindered not by trade barriers but by the decline in economic activity. Thus, the success of international talks focusing on solving the financial crisis is of vital importance to Hungary, even if they are performed by leading economic powers within and outside the European Union. As the outcome of talks will be critical, it is imperative for us to articulate and represent our interests well, even if we sometimes have to act as ‘lonely warriors’ in our immediate environment. It is even more crucial for us to have a credible economic policy, i.e. to reach a compromise on inevitable reforms.

György Mikósdi, economist, retired economic diplomat

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