MNB governor calls for competitiveness-boosting reforms


National Bank of Hungary (MNB) Governor György Matolcsy called for comprehensive competitiveness-boosting reforms in Hungary, with a further reduction of the personal income tax as a key element, in an interview published in Thursdayʼs issue of weekly Figyelő, summarized by state news agency MTI.   

In the interview, Matolcsy stressed the importance of cooperation between the government and the central bank and claimed that the MNBʼs programs have greatly supported growth and the reduction of the countryʼs economic vulnerability, playing an important part in strategy formulation.

At the request of Prime Minister Viktor Orbán, the MNB has intensely participated in work to base the economic turnaround on competitiveness and further reforms, Matolcsy added.

In contrast with other central banks, the MNB has opted for innovative, targeted measures rather than a policy of quantitative easing, and has managed to implement monetary easing while reducing its balance sheet in recent years, the governor explained.   

Matolcsy said the central bankʼs interest rate-cutting measures and its Funding for Growth Scheme generated almost half of Hungaryʼs economic growth between 2013 and 2016, while its loose monetary stance helped the countryʼs interest expenditures to drop by about 1.5% of GDP between 2013 and 2017. Savings in interest expenditures came to HUF 600 bln in 2016 alone, and to around HUF 1,600 bln since 2013, he asserted.

Speaking of the 3% inflation target, which the MNB projects to reach in mid-2019, Matolcsy said it is important to create price stability in a sustainable manner.

In connection with the forint exchange rate, the governor confirmed that the central bank has no exchange rate target, adding that it is the stability of the Hungarian currency that it considers important.   

Answering a question concerning the adoption of the euro, Matolcsy confirmed the central bankʼs view that meeting the Maastricht criteria is no longer enough for adopting the single currency.

"We need to meet a system of conditions that would ensure that the country will continue progressing along its growth path when already inside the euro zone," the central bank governor said.

The eurozone crisis and Brusselsʼ mistaken crisis management has revealed that the euro will not become the number one global currency, Matolcsy stated, pointing to the growing global role of China and the renminbi. While the West is struggling with many challenges and an internal crisis, historically important trade routes between Europe and Asia are being revived, he added, praising the Hungarian governmentʼs strategy of opening to the East.

Relations between China and Hungary have grown to the level of a general strategic partnership which will heighten Hungaryʼs already existing role as a bridge between East and West, the governor concluded.

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