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Stable regulatory environment needed for investment growth, MNB governor says

Boosting investments is a fundamental condition for the growth of the Hungarian economy, but this requires a stable regulatory environment, National Bank of Hungary (MNB) governor András Simor said at an economics conference in Eger on Saturday.

Simor said banks should be left alone to make profit, thus creating an incentive to expand their lending activities. He added that another important condition for growth would be the launch of an active labour market programme as well as support for research and development and vocational training.
He noted that Hungary's economic growth had outpaced the average in both the European Union and among the Visegrád countries in the second half of the 1990s and the first half of the 2000s. Now the country is behind the average in both, he added. Simor said exports were the sole engine of Hungary's economic growth, as investments declined steadily, domestic demand slumped and unemployment rose.
Bank lending has dropped drastically and is not expected to expand before 2015, he said. Simor said the problems of Hungary's economy were structural, not cyclical, and called on the government to use the available tools to manage these problems. Monetary policy can exercise an influence on cyclical problems, but rate-setters' decisions must be predictable to assist in changing the present situation, he said.
The MNB's rate-setting Monetary Council has cut the central bank base rate by narrow votes at the last two of its meetings as differences over the effect of monetary policy on growth divides members.