The most important goal of Hungary's economic policy ought to be strengthening confidence and predictability, Zsigmond Járai, the recently appointed chairman of the supervisory board of the National Bank of Hungary said at an event organized by the Hungarian Business Leaders Forum.
Hungary's macroeconomic indicators are generally favorable, but investors' assessment of the country remains negative; thus, the main aim of economic policy ought to be strengthening predictability and confidence, Járai said. The “weakest link in the chain” is a lack of confidence and predictability at present, he added.
Hungary can start talking about setting a date to join the eurozone in 3-4 years at the earliest in an optimistic scenario, he said.
Járai said Hungary's economic policy at present was risky. Although favorable steps were taken in the past half year and Hungary's trade and current-account balances are both positive, economic growth started, government measures such as the introduction of extraordinary taxes, as well as a rough relationship with the IMF, the elimination of the office of the Fiscal Council and the approval of the Media Act have “destroyed business confidence and investor confidence”.
In the interest of improving Hungary's competiveness, confidence in the country must be increased and the predictability of its economic policy must be strengthened, he said.
Járai gave a positive assessment of the New Széchenyi Plan, a program that supports investments with state and European Union funding. “We are on the right path, but there will be difficult years,” he added.
Answering a question, Járai acknowledged that there was extraordinary conflict between the central bank's monetary policy and the government's fiscal policy. The two have to return to a state of harmony, he said.
Asked about the central bank's tightening cycle started in November, Járai said he did not have enough information to assess whether the rate rises were appropriate or not.
Járai said the central bank's main task should be to create price stability. During his time as central bank governor, that meant inflation of around or under 3%, he added.
Speaking about the circumstances in the eurozone, Járai said the euro was not the problem, but the undisciplined fiscal policy of several member states in the eurozone.
“Fortunately, Hungary is a long way from the euro. In order to move closer, we should meet stronger, more strict requirements than the Maastricht criteria,” he said. (MTI – Econews)