<b>Hungary - A victim of its own success</b>
|Headline: Hungary - A victim of its own success
Date: March 2000
Author: Nigel Dudley
Hungary is the favoured east European convergence play of many international investors. But the inflow of funds to the domestic bond and equity markets has been tricky to manage. The central bank has slashed interest rates, raising fears about inflation. If Hungary does make it into the EU and EMU, its problems will shift again. Hungary will face the familiar problem of all small euro sovereigns: a disappearing domestic investor base. Nigel Dudley reports
Western bankers had been expecting a cut in rates as the government and central bank became increasingly alarmed at what they called the "almost frightening" inflow of foreign money. Even though the central bank was buying large amounts of foreign exchange, the forint was hard against the top of its exchange rate band.