Hungary: Central bank governors concur
Economic growth can be accelerated only by a considerable decrease in state expenditure, which would make a base rate cut possible, and would also spur economic growth, said Zsigmond Járai, ex-governor of the central bank (MNB) in a radio program of Gazdasági Rádió.
Hungary redistributes 51%-52% of GDP, while in other competing countries this ratio is 40%. Thus, budget expenditure should be decreased by 12%, i.e. Ft 3,000 billion, which is feasible during a period of 5 to 10 years. Central administration costs are 2%-3% of GDP higher than those in similar countries, and welfare and social expenses are 4%-5% higher than necessary. MNB governor András Simor should have earlier, when he was a member of the Convergence Council, accepted his views, Járai said, namely that tax raises will slow the economy. MNB will not reach the targeted 3% inflation for years, he predicted. If he were to lead the Monetary Council (MT), policy would be stricter, he said. (Gazdasági Rádió)
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