Hungary: Simor on looming base rate hike

Initiatives

András Simor, governor of the Hungarian central bank (MNB), sees raising the forint base rate increasingly inevitable, considering worse-than-expected inflation, rising international interest rates and significant deterioration in the prospects for domestic growth.

In his Saturday article in the daily Népszabadság, Simor called for a solution to long-term growth problems in Hungary. The economy is resuming a path of growth slower than expected: beside unsustainable budget expenses, the investment rate was also much lower since 2000 than in the previous period or in the neighboring countries. Although employment is one of the lowest in Europe, nothing happened to improve the situation, and productivity growth is falling continuously. Innovation efficiency is low, while ineffective administration and the corruption-generating political party financing distort economic incentives, wrote Simon.

The budget expenses reach 50% of GDP, which is much higher than in other Visegrád countries, due mainly to extreme welfare costs and high public dept expenses. As solutions, a cut of expenditure by Ft 2,000–2,500 billion is needed, the Cenbank governor argues, to be able to decrease the existing over-taxation in the economy. The abolishing of minimum-wage regulations is also to be considered, while the system of social benefits should be changed in a way to force beneficiaries back to work. Hungary will either remain a country depending on constant state provision and lag behind, or a country that learns self-provision, market economy, responsibility and risk taking, and catches up to Visegrád countries, stated Simor. (Napi Gazdaság, Gazdasági Rádió)

ADVERTISEMENT

MNB Keeps 0.5% Capital Buffer Activation Date MNB

MNB Keeps 0.5% Capital Buffer Activation Date

Ukraine Suspends OTP Status on 'Sponsors of War' List Ukraine Crisis

Ukraine Suspends OTP Status on 'Sponsors of War' List

ÖBB Detaches Hungarian Direct Trains Due to Delays Transport

ÖBB Detaches Hungarian Direct Trains Due to Delays

Pálinka Added to EU-Japan Geographical Indication Deal Drinks

Pálinka Added to EU-Japan Geographical Indication Deal

SUPPORT THE BUDAPEST BUSINESS JOURNAL

Producing journalism that is worthy of the name is a costly business. For 27 years, the publishers, editors and reporters of the Budapest Business Journal have striven to bring you business news that works, information that you can trust, that is factual, accurate and presented without fear or favor.
Newspaper organizations across the globe have struggled to find a business model that allows them to continue to excel, without compromising their ability to perform. Most recently, some have experimented with the idea of involving their most important stakeholders, their readers.
We would like to offer that same opportunity to our readers. We would like to invite you to help us deliver the quality business journalism you require. Hit our Support the BBJ button and you can choose the how much and how often you send us your contributions.