The latest developments of the Greek crisis are having a limited impact on the Hungarian economy, as trade relations with Greece are relatively modest, constituting only 0.4 percent of overall foreign trade volume, Minister for National Economy Mihály Varga told journalists following the presentation ceremony of Awards for Successful Enterprises in Budapest.

Banking relations are also minimal, he added, and Greek banks do not have subsidiaries in Hungary. However, the Minister pointed out, the crisis will likely have two visible effects: one on the forint exchange rate and the other on government bond yields.

Over the past weeks, markets have already priced in an escalation of the crisis; the impacts of a potential Greek default or Grexit. However, it is possible that investors will abandon government securities of EU periphery countries and seek investment opportunities elsewhere. Therefore, government bond yields may rise, but not drastically.

Mihály Varga stated that the Government is closely monitoring markets and in case they perceive radical movements either in exchange rates or government bond yields, the necessary steps will be taken.

In the opinion of the Minister, for the time being the tourism sector does not feel the heat from the Greek crisis. “Many Hungarian families have chosen Greece as a tourism destination and there is no visible sign of a crisis or a warning of imminent emergency.”

The Minister stressed that impacts largely depend on how Greek banks can maintain solvency. In case cash withdrawals and payment transfers are significantly restricted, it may put off Hungarian tourists, as “nobody wants to travel to a country where major restrictions are in place,” he said.

At another event, Minister of State for Public Finances Péter Benő Banai said that the Greek crisis is expected to have an effect on longer dated government securities, while short-dated papers will be less influenced by developments. The Minister of State emphasised that events like these confirm the adequacy and success of Government policy that has cut the share of forex debt within general government debt. “Thanks to changes in general government debt financing, the country’s external vulnerability has been reduced; the share of forex debt within total government debt is currently some 35 percent,” he added.

(Ministry for National Economy)