The building of the NBH in Budapest – Photo: wikimedia

Matolcsy plugs away at arguments for fiscal tightening

National Bank of Hungary (NBH) governor Gyorgy Matolcsy reiterated and refined arguments for reining in next year's budget deficit in an op-ed piece published on the website of daily Magyar Nemzet on Monday.

Matolcsy has said a number of times that the government’s 5.9-percent-of-GDP budget deficit target for next year is too high, while stressing that the central bank continues to move forward in a strategic alliance with the government, in spite of differences on the matter.

In the piece, Matolcsy said the more fiscal resources a state puts toward achieving recovery, the smaller the chance the return to economic growth will be sustainable, and he warned that “tipped balances will force fiscal austerity with time”.

Matolcsy said the faster fiscal balance is achieved, the faster resources outside of the budget become available to support sustainable growth.

He noted that Hungarians have some 44 billion forints (EUR 122m) in financial assets that can be mobilised for the recovery, pointing out that the share of government securities held by domestic retail investors, at close to 25 percent, is well over the 2 percent average rate for the region.

“The lion’s share of the financial resources necessary to return to a path of balance and convergence is available in Hungary. Those resources will only become available if we first crack inflation and set the fiscal deficit at around 3 percent (3-3.4 percent), and keep it under 3 percent from 2023,” Matolcsy said.

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