The most important feature of good political forecasts is accuracy. The credibility of Political Capital’s risk forecasts is based on logically coherent scenarios that cover all the possibilities and the ability of identifying the most likely scenario using exclusive information, precise and detailed analysis of the political situation, and extrapolation of the political tendencies. Here are some forecasts and political events from the previous years:
| The possible replacement of the PM
|In the past few weeks political support for the Prime Minister has noticeably declined.
(…) The Hungarian PM’s position is weakening further, and the possibility of his replacement is increasing.
(…) it is very likely that an economic expert, a „technocrat” would assume the premiership.
Hungary: Breaking up with the region? Risk Warning, 4 March, 2009.
|On March 21 Ferenc Gyurcsány announced that he was initiating a no-confidence vote against himself to find his successor. He explained his decision with the loss of credibility, and lack of social and political support. His successor was Gordon Bajnai, a political outsider and a non-partisan technocrat who established an expert government with economic experts in the key positions.|
|Falling currency rate|
|Due to its political vulnerability, the HUF is likely to decouple from the region in the near future.
(…) Hungary will lose both a share of its export markets and its currency’s artificial support.
(…) Therefore the risk of a speculative attack against the HUF has increased dramatically.
Risk Warning: HUF’s vulnerability rising. 4 April, 2008.
We believe that the strong Hungarian currency will stall in the fall, the currently highly overvalued forint may stumble.
Political Forecast, 31 July, 2008.
|In the first half of 2008, when PC issued its warning, the forint was strongly overvalued. In 2008 July, the rate of EUR/HUF was between 230 and 235. In 2008 October, the currency rate fell sharply and reached the level of 280 because of speculative attacks and the dramatic loss of confidence in the Hungarian economy and state securities. Hungary sunsequently needed an IMF/EU/World Bank fiscal package and hike in interest rates dramatically (up to 11,5 percent) to avoid the bankruptcy of the state and its currency. The EUR/HUF rate approached the level of 320 in 2009 March.|
| Government stability
|In a short-term the government will remain stable regardless of the rising discontent due to the inflationary process and the threat of negative monitoring report by the EC that we expect in July 2008.
(…)The right wing opposition will remain divided and will act anonymously only if there is an opportunity for major attack against the government – for example conducting a non-confidence vote after a possible negative report.
Political Forecast, 17 June, 2008.
|Bulgaria’s right wing opposition on Tuesday lost a new no-confidence motion against the government over its much-criticised record fighting crime and corruption. The opposition accused the ruling centre-left coalition of inflicting “irreparable material and moral damage to the country” after the European Union inflicted financial sanctions on the country for not taking tough enough action over corruption.
eubusiness.com, 29 July, 2008.
| Fall back of the real estate sector
|(…) New worries emerged about the UAE property market. Property prices in Dubai could decline by as much as 40% as a flood of new apartments come onto the market.
Regional Risk Watch Middle East. 1 September, 2008.
|Property prices in one of Dubai’s prestigious developments have fallen by as much as 50 percent, according to real estate brokers. Dubai Development Sees Prices Drop as much as Half.
12 November, 2008. nuwireinvestor.com
|Election year spending
|On 30th September 2008, in the heat of the electoral campaign, Romanian deputies voted in favour of a motion that would raise teachers' salaries by more than 50 percent. The decision was initiated by the Social Democrats (PSD) and led to a nationwide debate as the government and the central bank oppose it.
Romania has dropped into the "election year spending trap", as witnessed in Hungary in 2002 and 2006.
Romania, which has recently enjoyed an economic boom, may be set back as a result of the motion and face long term fiscal, competitiveness and growth problems.
Romania is entering the era of populism, when the hunt for votes by political parties will set about the spiral of spending promises like those which took place in Hungary after 2000.
Risk Warning, 13 October 2008.
|Romania will ask the International Monetary Fund to allow it a higher budget deficit of up to 7 percent of gross domestic product this year, hoping to follow Hungary in securing easier terms for an aid package.
30 July 2009.
Romanian finance minister Georghe Pogea has said that the country's economy might decline in 2009 by 6.5 to 7.1 percent, and not 4.1 percent as it was expected in March.
17 July 2009.
| Budget deficit and GDP
|Since there was no announcement about any provision aiming at a rise in incomes, it is very likely that the budget deficit will grow at a higher level than the Finance Minister forecasted (maximum 3 percent).
Regional Risk Watch, Issue 2/2009, 6 February 2009.
In spite of the fact that Slovakia is still one of the best actors among the crisis-affected economies of the EU, (…) the increasingly narrowing European demand will hit industrial production in 2009 too (which dropped dramatically by 16.8 percent year-on-year in December 2008).
Though the Finance Ministry still predicts 2.4 percent growth (…) and several analysts still expect Slovakia’s economy to grow at between 2 and 3 percent (…) the question is whether Slovakia is able to present any growth this year.
Although the World Bank lists the country among the six states that have the possibility to increase their economy, according to Political Capital a positive GDP-growth in Slovakia for 2009 is unlikely, especially as unemployment rate reached 9.03 percent in January (a 0.64 percent increase on month-on-month) and a further rise is expected – not only because of the lay-offs, but also because of the people returning to Slovakia after working abroad.
Regional Risk Watch, Issue 3/2009, 27 February 2009.
|In revised GDP figures released on April 7, the central bank (Narodna Banka Slovenska) said that Slovakia’s economy would contract by 2.4 percent in 2009. Its previous estimate had projected growth of 2.1 percent.
13 April 2009.
The volume of Gross Domestic Product in the first quarter of 2009 according to flash estimate procedure reached EUR 14,678.4 million. In comparison with the first quarter of 2008, the volume decreased in constant prices by 5.4% (at current prices by 5.9%).
15 May 2009.
The state budget deficit reached €1.108 billion up to the end of June, up from €832 million in May, the Finance Ministry reported on Wednesday, July 1. The deficit has now exceeded the sum planned for the whole of 2009 (€1.009 billion).
2 July 2009.