Matolcsy again argues for reining in budget deficit


György Matolcsy

National Bank of Hungary (MNB) governor György Matolcsy reiterated and refined arguments for reining in next year's budget deficit in an op-ed piece published on the website of conservative daily Magyar Nemzet. 

Matolcsy has said several times that the government's 5.9%-of-GDP general government deficit target for next year is too high while stressing that the central bank continues to move forward in a strategic alliance with the government, despite differences on the matter. 

In the piece published yesterday, Matolcsy said the more fiscal resources a state puts toward achieving recovery, the smaller the chance the return to economic growth will be sustainable, and he warned that "tipped balances will force fiscal austerity with time." 

Matolcsy said the faster fiscal balance is achieved, the faster resources outside the budget become available to support sustainable growth. He noted that Hungarians have some HUF 44 bln in financial assets that can be mobilized for the recovery, pointing out that the share of government securities held by domestic retail investors, at close to 25%, is well over the 2% average rate for the region. 

"The lion's share of the financial resources necessary to return to a path of balance and convergence is available in Hungary. Those resources will only become available if we first crack inflation and set the fiscal deficit at around 3-3.4%, and keep it under 3% from 2023," Matolcsy warned.

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