This is a new world in which Hungary must rely on domestic savings, in sharp contrast with the previous years, Central Bank of Hungary’s (MNB) governor András Simor told the press on Monday.
MNB neither intends to nor can it prevent this necessary adjustment, Simor said.
The MNB can only slow and smooth the process through improving banks' access to forint liquidity, the central bank governor said.
The central bank introduced two new facilities providing forint liquidity - an unlimited two-week and a fixed-rate pre-set volume six-month secured loan facility, both available weekly - late October, and, in a most recent measure, it cut banks' mandatory reserve rate from 5% to 2%, Simor said.
The new reserve rate, approved at the Monetary Council's Monday meeting, will be effective first on the December reserve period. According to Econews calculations the move increases forint liquidity in the financial system by some HUF 450 billion.
In the drastically changed global environment Hungary will no longer be able to go on with the low domestic savings and increasing external financing of the past years, Simor said.
An increase in savings will reduce consumption which could make the expected recession harder, he conceded in response to a question. Increasing savings is, however, inevitable, Simor said. However painful Hungary should change its focus and concentrate on the long-term instead of the short-term as it did now for many years, he said. (MTI – Econews)