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National Bank President urges fiscal readjustment

November 17th, 2021

In an opinion piece in the main pro-government daily, National Bank president György Matolcsy warns that a high public deficit and the worsening trade balance make Hungary vulnerable to international financial shocks and demands swift action.

In Magyar Nemzet, Matolcsy predicts that economic growth will not be sustainable unless the government cuts back on its expenditures. He admits that the main cause of a public deficit which already amounts to 8% of GDP was the Covid 19 pandemic but finds it unjustified that even as industrial output reaches pre-Covid levels, deficits still remain high. He laments the fact that Hungary’s sovereign debt ratio is back to 80% of GDP, the level the Orbán government inherited 10 years ago. Meanwhile, Hungary’s terms of trade have deteriorated because of the sharp increase in oil prices. The substantial foreign trade deficit coupled with the deficit in public finances make Hungary extremely vulnerable in the case of another international market shock, he stresses. He therefore calls on the government to spend less. He doesn’t recommend the withdrawal of recent welfare measures but believes that several big non-productive investment projects should be immediately halted before it’s too late. In a postscript to his article, Matolcsy explains his criticism of the government’s fiscal policy, quoting Mahatma Gandhi: “Honest disagreement is often a good sign of progress.”

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