Written by BT/MTI

Central Bank Governor Gyorgy Matolcsy called for a complete turnaround in Hungary’s economic policy on Thursday at the 62nd Travelling Conference of Economists in Nyiregyhaza (NE Hungary). He argued that a loss of economic policy direction between 2021 and 2024 has undermined the achievements of the 2010s and jeopardized the achievement of the goals set for the period up to 2030.

Hungary has two dangerous opponents, Matolcsy said: a high and costly debt burden and high and persistent inflation.

According to Mr Matolcsy, there had been a wrong turn in economic policy, the government had failed to get the budget deficit under control and there had been no rapprochement of the central bank in the fight against inflation for one and a half to two years.

Mr Matolcsy said that due to inflation, a significant number of households and businesses have suffered such a large loss of wealth that “victims of the inflation shock” have arrived: those who do not consume and those who have lost half of their reserves. State budget expenditure has increased in this way and revenues have fallen, he added.

He said it is flawed economic policy to claim that real wage growth will automatically lead to consumption. Real wages cover only half of incomes, the real value of pensions and social spending has not increased, he noted.

The central bank governor said we have gone from a budget that was close to balance to a permanently high deficit and that it is unacceptable and life-threatening to allow such a deficit to continue for the next decade.

Mr Matolcsy said there is a need for green reindustrialisation and a new service sector as this will help balance the current account.