At the 62nd Itinerant Economists’ Conference in Nyiregyhaza (northeastern Hungary) on Thursday, Central Bank Governor Gyorgy Matolcsy called for a complete turnaround in Hungary’s economic policy, arguing that a loss of economic policy direction between 2021 and 2024 would undermine the achievements of the 2010s and jeopardize the achievement of the goals set for the period up to 2030.
Hungary has two dangerous enemies, said Mr Matolcsy: high and expensive debt and high and persistent inflation.
Mr Matolcsy said there had been a wrong turn in economic policy. The government had failed to get the budget deficit under control and had not joined 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 had suffered such a loss of wealth that there were now “victims of the inflation shock”: those who do not consume and those who have lost half of their reserves. The state budget’s expenditure has thus increased and its revenues have decreased, he added.
He said it was a wrong economic policy to claim that an increase in real wages would automatically lead to more consumption. Real wages only covered half of incomes, and the real value of pensions and social spending had not increased, he noted.
The central bank governor said we had gone from a near-balanced budget to a persistently high deficit, and it was unacceptable and life-threatening to carry such a deficit for a whole decade.
Mr Matolcsy said green reindustrialisation and a new service sector were necessary because they would help balance the current account.
