An agreement on a precautionary financial assistance package from the International Monetary Fund and the European Union is indispensable to restoring confidence in the Hungarian economy, National Bank of Hungary governor András Simor said at a conference organized by business daily Napi Gazdaság on Thursday.
Simor said such an agreement would provide a safety net for Hungary, strengthen the credibility of the country's economic policy and support a reduction in state debt.
He acknowledged the significant adjustment in the Hungarian economy over the past year, but said the lack of confidence, the weak forint and the country's high level of debt required a balance sheet adjustment that takes a far bigger bite out of economic growth.
He added that in spite of austerity measures, debt continued to be regenerated because of the lack of confidence and could lead to a bigger and prolonged adjustment.
Simor said the central bank has to smooth the path of adjustment and reduce obstacles to growth without endangering its primary goal. He added that the MNB's possibilities were limited and it could not take over the role of markets, but it could play a role in managing temporary market disorders, such as it aimed to do with a program of measures that aim to boost lending unveiled on Wednesday.