HUNGARY

1
HUNGARYS EUROPEAN CONVERGENCE CHALLENGES AND
OPPORTUNITIES(A Bankers Perspective)

• MARKO VOLJC, CEO, KH BANK
• XII. CEO Meeting
• 21-22 September, 2006.

2
Introduction

• Some Caveats only recently arrived to Hungary
• no political expert
• Personal Views!
• Brief Background
• An Honor and Pleasure to Address the Audience

3
Pre-Accession Period

• Hungary An Early Reformer
• Foreign Investors Darling
• Mid-1990s Disequilibria and the Bokros Plan
• Back to Business as Usual

4
EU Membership Negotiations and the 2004 Eastern
Expansion

• Preparing for Europe
• Honeymoon 2004

5
Central European Soap Opera

• Political and Economic Developments in the
  Visegrád Group Problems and Growing
  Divergence of the CE States
• Threat to Economic Progress in CE4
• Weaknesses in the Visegrád Group

6
How Deep are Hungarys Problems?

• The Weakest Link of Emerging Europe?
• Any Parallels with Latin America?
• Credit Ratings Another Downgrading Ahead?

7
Going into the Downturn

• H1 06 Upbeat Performance
• H2 06 Beginning of a Downturn
• 2007 A Critical Year
• Global Environment and EUs Performance Key
  factors

8
Reforms at Last!?

• Fiscal Reform ? Raising Revenues ?
  Cutting Costs as Well?
• Structural Reforms ? Pension System
• ? Health
• ? Education
• How Far Will the Government Go?

9
External Disequlibria

• External Vulnerabilities Threaten Currency
  Stability
• IMFs View, Markets reaction
• Central Bank in a Bind
• ? Inflation Pressures ? Weakening of
  the HUF ? Tightening Cycle

10
Convergence program is It For Real?

• No Pain, No Gain!
• Political Committment and Staying Power
• What Will Markets Do?
• Business Environment Ratings
• How Will Hungary Fare?