Index - Economy - Mihály Varga will see the deterioration of economic indicators in Hungary

Overall, inflation and the current account have been deteriorating in recent months. At the same time, these indicators are mainly influenced by external factors, such as rising energy, raw material and transportation prices, supply problems, declining international tourism due to the epidemic, and domestic fiscal and wage developments play only a moderate role in their unfavorable development.

– said Minister of Finance Mihály Varga in his article to the World Economy, asserting that the government’s decisions have a minimal effect on the “unpleasantly high rate of money deterioration”.

Yet a high value similar to the latest inflation figure of 6.5 percent in October was last measured in September 2012.

(…) Opinions have also emerged that also see growth-friendly fiscal policies as a major cause of inflation

– writes Mihály Varga, which may have been another message to the Governor of the central bank György Matolcsy, who thought a little differently in the Hungarian Nation.

The head of the Magyar Nemzeti Bank (MNB) saw that the budget deficit could be around eight percent of GDP and the government debt ratio around eighty percent of GDP.

Matolcsy also pointed out that this is compounded by higher inflation, the rise of which is mainly due to global economic developments,

but it is undoubtedly affected by high domestic budget deficits and higher income outflows than productivity and competitiveness improvements. Some of the steps to improve living standards can be maintained, but some investments that do not strengthen competitiveness should be said goodbye.

Hungary is once again trapped in the twin deficit, ie the simultaneous occurrence of the current account deficit and the general government deficit, from which it was able to break out with a successful fiscal turn after 2010, predicted György Matolcsy, referring to the period when his economic policy as Minister of National Economy fairy tale rated it on CNN. “The hungarian fairytale,” he said in an ominous interview.

On the other hand, Mihály Varga sees that the budget deficit is really high, but this was caused by the crisis management due to the coronavirus epidemic, and it will be settled soon. According to him, the price increase is mainly due to the increase in import prices.

On the other hand, if Hungary imports more in the future and import prices are unlikely to fall, while the Hungarian forint has fallen to historic lows due to inflation, it is doubtful that the economy will soon be on a stable footing. It is also worth bearing in mind that the Orbán government has been involved in a dispute with Brussels over EU recovery funds, so it has launched a recovery program in Hungary without them.

Mihály Varga emphasized in his writing that the government is determined to maintain the sustainable growth trajectory established in recent years and to preserve the internal and external financial balance. The following steps seem necessary:

  • reducing the budget deficit,
  • reducing our energy dependency,
  • strengthening the country’s attractiveness to foreign tourists,
  • diversifying the economy by strengthening sectors that are less tied to the automotive industry.

By the way, György Matolcsy and Mihály Varga are not talking to each other for the first time;

(World economy/ HVG)

(Cover image: Mihály Varga on November 23, 2021. Photo: Balázs Mohai / MTI)

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