Economic analyses in Spring 2022
Külgazdaság has been publishing the analyses and the forecasts of Hungarian economic research institutions since 2001 and this tradition is continued in this issue as well. According to the Spring World Economic Outlook of the International Monetary Fund, “The war in Ukraine has triggered a costly humanitarian crisis that demands a peaceful resolution. At the same time, economic damage from the conflict will contribute to a significant slowdown in global growth in 2022 and add to inflation. Fuel and food prices have increased rapidly, hitting vulnerable populations in low-income countries hardest. Global growth is projected to slow from an estimated 6.1 percent in 2021 to 3.6 percent in 2022 and 2023. This is 0.8 and 0.2 percentage points lower for 2022 and 2023 than projected in January.” At the same time, the OECD estimates that in the global economy, GDP growth could be more than 1 percentage point lower this year than was projected before the war, whereas the rate of inflation, already elevated at the beginning of the year, could be higher than it would have been without the war by at least another 2.5 percentage points. The Hungarian National Bank and the research institutions were also compelled to modify their earlier forecasts and somehow estimate the impact of the war in Ukraine. Their brand new analyses arrived at the editorial office of Külgazdaság on April, 10th-12th.
The impact of the war against Ukraine on global value chains
KRISZTIÁN KOPPÁNY – PÉTER VAKHAL
This paper uses world trade indicators and international input-output tables to analyse the first-round economic effects of Russia’s war against Ukraine on value chains. Although the global world trade weight of the two countries is small, in some product groups or products (cereals, sunflower oil, metals, inert gases, etc.) it is dominant, and as a consequence, the reduction or complete loss of supply has caused or is causing disruptions in the food supply of some regions and in the production of certain industries, leading to a surge in world market prices and anticipating sustained high price levels. The main conclusion of the paper using the Eora global input-output database is that the major economic damage in the short term will be suffered by Ukraine, the CIS countries (Commonwealth of Independent States2 ), Russia and the Central and Eastern European EU member states. For Hungary, the risks are significant, especially through demand and supply shocks triggered by the embargo against Russia, but the exposure is moderate compared to the Baltic Republics and Slovakia. In this context, the report demonstrated the importance of diversification in the short term and technological development in the long term. The scientific novelty of the study is related to the innovative input-output approach used to quantify the direct economic exposures by investigating the impact of sales and production losses due to embargo and war. It has thus succeeded in capturing the bottleneck in the world economy caused by the shortrun loss of exports and imports (especially of energy commodities) that cannot be substituted, thereby raw materials needed for production turn out to be unavailable. Journal of Economic Literature (JEL) codes: C67, F40, F51.
Global Value Chains and Multinational Corporations – how do they relate? Summary of the international scientific conference of ELRN CERS Institute of World Economics (Budapest, 9-10th December 2021)
GÁBOR TÚRY
In addition to analysing the global production networks of multinational companies, the presentations at the two-day international conference discussed the impact of and responses to the disruptions in global supply chains caused by the coronavirus (Covid-19) pandemic. The results
presented confirm that participation in the global value chain protects companies to some extent from negative shocks. However, the ability of firms to manage supply chain disruptions is limited due to the lack of rapid diversification of supplier relationships. At the same time, there is a regionalisation trend in the geographical organisation of global value chains, as supported by several research findings. Reducing the length of the supply chain is also key to the sustainability of production. This is highlighted not only by the problems of the global organisation of the fashion industry, but also by the study of rare earth element mining. Several researches highlighted the difficulties of linking local companies to global value chains and the low and slowly growing domestic value added content. Indeed, local economies have more limited capabilities and resources to increase their share of higher value-added activities. Journal of Economic Literature (JEL) kódok: D22, F21, F23, L23
BOOK REVIEW
International Management András Blahó, Erzsébet Czakó, József Poór (Eds.) (2021). International Management (2nd extended edition, Akadémiai Kiadó, Budapest, 592 pages, in Hungarian)
MAGDOLNA SASS – ANDREA SZALAVETZ
The review of the handbook entitled International Management emphasizes the importance of a volume on the topic written in Hungarian and from a Hungarian perspective. The tripartite book presents in detail the macroeconomic environment affecting management performance, the specificities of corporate functions, and these two factors are illustrated by interesting corporate case studies. In addition to the book’s strengths (thorough and easy to learn, with some excellent chapters and case studies), the authors of this review also point out some weaknesses. They suggest, among other things, to pursue an approach from the perspective of company cases, to include a brief description of current debates in the international literature, to discuss problems with the availability of data, and the provision of data sources. Journal of Economic Literature (JEL) codes: M1, M2, M3, M5.