Mr. Matolcsy has made the forint slightly weaker today

HUNGARY - In Brief 31 Aug 2020 by Istvan Racz

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The forint has weakened by 2-3 units, i.e. less than 1%, in EURHUF terms, on MNB governor Matolcsy writing in an article (on Növekedés.hu, essentially his own personal website) the following: "The temptation is high to give up the proven recipe of "Equilibrium and growth". An abundance of financial resources, unparalleled in Hungary's economic history, is going to come about, from the EU, the programs of the MNB, the banking system, and from savings made by families and enterprises. The fiscal deficit and government debt can be temporarily allowed to rise, but it will be compulsory to turn back after 2022. The real risk of this abundance of financial resources is that kind of spending, which is not harmonised with a turnaround in competitiveness. If we are not careful enough, the debacle of the 1970s can be repeated: external indebtedness to maintain an unsustainable structure of the economy."Stepping quickly beyond general philosophy, the practical message of the foregoing is clear: the MNB will not do anything against the recently announced sharp upward correction of this year's fiscal deficit target. This is no surprise, of course, as everyone has known for long that Mr. Matolcsy's MNB is part of the Prime Minister's team, which is not a condemning statement from us but the establishment of an obvious fact. So the market has reacted correctly by not moving too much on this piece of news.The rest is a bit more interesting, but is only a kind of disclaimer and is hardly of fundamental importance. Tolerating a temporary high fiscal deficit is the right thing to do, according to the article, because the current situation has made it practically possible, and as it also ...