Matolcsy calls for economic policy turnaround

Hungary has two dangerous adversaries, Mr Matolcsy said, high and costly indebtedness and high and stubborn inflation.

Mr Matolcsy said there had been a wrong turn in economic policy, the government failed to control the budget deficit and did not join the central bank in the fight against inflation for one and a half to two years.

Mr Matolcsy said because of inflation a significant number of households and businesses suffered such a loss of wealth that “victims of the inflationary shock” have arrived: those who do not consume and those who have lost half of their reserves. The expenses of the state budget this way increased and its revenues decreased, he added.

He said it is a faulty economic policy to claim that real wage growth will automatically lead to consumption. Real wages cover only half of incomes, the real value of pensions and social expenses did not increase, he noted.

The central bank governor said we have moved from a nearly balanced budget to a permanently high deficit, and it is unacceptable and life-threatening to carry such a deficit through the decade.

Mr Matolcsy said a green re-industrialization is needed and a new service sector because it helps to balance the current account.