MNB governor calls for looser fiscal policy, pleased with the current policy line of the MNB

HUNGARY - In Brief 06 Sep 2019 by Istvan Racz

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MNB governor Matolcsy spoke yesterday at the annual conference of the Hungarian Society of Economics. In his usual visionary style, he enlisted a large number of negative international phenomena from Brexit and East-West trade war to the weak German economy, Italy's problems, North-South conflicts within Europe and Gulf-region risks, which, according to his conclusion, clearly point to the growing risk of a coming global crisis. Against these problems, he said, the Hungarian economy has shown an excellent performance so far, but to keep it that way in the face of a deteriorating environment, it will require a number of measures, including ones to improve competitiveness, others to reinforce Hungary's business cycle, yet others to support high-potential industries and to improve the labor market situation.Crucially, it is striking how much Mr. Matolcsy continues to be worried about growth prospect and how little about macroeconomic imbalances. In his speech, he said that inflation has essentially disappeared from today's economy, and played down concerns related to monetary expansion and wage pressures completely. In terms of new policies, he essentially expressed full satisfaction with what the MNB has been doing lately, including mainly its efforts to support bank lending and to revitalise the domestic corporate bond market. However, he seemed to expect more from the government, in the form of more spending on support to selected industries, the implementation of the MNB's long-known competitiveness proposals and measures to bring Hungarians working in Western Europe back to Hungary, by way of higher domestic wages in the first place.Although this lecture was held at ...