The shocks of recent years have highlighted our economic weaknesses, for example in the manufacturing industry, Gyula Pleschinger, president of the Hungarian Economic Society, indicated in his opening speech. That is why competitiveness plays a prominent role at the current traveling assembly.
He handed over the floor to Central Bank Governor György Matolcsy, whose speech was already attended by a lot of attention at last year’s traveling assembly, when he highlighted that the government increased inflation by 3-4 percent with the price cap. And we guessed that the president of the MNB would give another high-impact speech, as the title of his presentation foreshadowed: “Somewhere we lost our way again”.
From 2021, Hungary is at a loss for economic policy
György Matolcsy began. He added that we were attacked by Covid in 2020, and it was already indicated that inflation would not only return, but could even last for decades. “At that time, few people believed us, then we launched the anti-inflation fight with several countries in 2021, then they believed that maybe the Central Europeans were right. We knew it, we signaled it, we said it would be difficult, we signaled it to the government, but they didn’t listen to us,” he said. According to him, there was a two-year delay, they were only taken seriously in 2023 and the fight against inflation. According to him, the government even took steps to increase inflation, thereby practically repeating last year’s criticisms.
The central bank stepped on the brakes and the government stepped on the gas, several people said earlier, and this turned into gas
he said. This story justifies the title and the fact that the central bank, which is celebrating its 100th birthday, makes decisions on the basis of facts and data, and then makes recommendations to allied state institutions, for example, to advance the fight against inflation, explained György Matolcsy.
How can we win the decade?
Table of Contents
- 0.1 How can we win the decade?
- 0.2 György Matolcsy: This is a wrong economic turn
- 0.3 A shock comes every decade and a half
- 0.4 There is a development gap in the country
- 1 Here are some People Also Ask (PAA) questions related to the topic “The Challenges of Hungary’s Economic Policy: György Matolcsy’s Warning”:
He said that already at the beginning of the previous decade, the challenges and turning points that had to be achieved were identified with the Prime Minister. Such was, for example, the demographic turn, and the fact that the balance of the public finances was adjusted in 18 months.
We won the 2010-2019 decade
said the governor of the central bank. “The best decade didn’t come by itself, it took many twists and turns.” Among other things, it lists the job protection action plan, the growth loan program, and the forintization of Swiss franc loans. But now, according to him, we are losing our way – the 2010-19 results are in danger.
We could lose the next decade
– he warned, pointing out that there are two big enemies: high budget indebtedness and high and stubborn inflation. According to him, this is because the government let go of the public budget deficit and did not join the fight against inflation in time. “We should not be accused of Cyclops operation and that we operate illegally,” he said, probably referring to the Index interview with Minister of National Economy Márton Nagy.
In 2023, we were in fifth place from behind in convergence, i.e. we did not approach the most developed countries, while less developed countries approached us. In 2019, we were still in 20th place, and by the end of 2023 we will be in 23rd place in GDP per capita in the EU, said Matolcsy.
György Matolcsy: This is a wrong economic turn
Inflation is at the center of the wrong economic turn, said the president of the MNB. A significant part of Hungarian inflation comes from food prices. The productivity of our food industry is second to last in the European Union, according to him, this is unacceptable.
This decade is a relative of the 1970s, and inflation is the main enemy
he highlighted. According to him, the government mistakenly accepted the argument that inflation is good because more income comes to the state coffers. However, the victims of the inflationary shock arrived, whose consumption fell. According to the central bank governor, inflation casts a long shadow.
Inflation burned several thousand billion HUF in the savings of the middle class
he lighted it. Last year, we fell seven places on the most important competitiveness list, which he attributes to the “wrong” economic policy. He also pointed out that the high export performance includes low domestic added value, i.e. we will not be rich simply because foreign investments come to Hungary. Foreign investments are necessary, but it does not matter how much the added value is – it is more in sales than in production, which is emphasized in our country. He also touched on the fact that we could not maintain the turnaround in our fertility rate.
According to György Matolcsy
it was not a realistic goal from Viktor Orbán to be among the top 5 countries in the EU by 2030. I recommend that this goal be set for 2040, because it will not be met by 2030
– emphasized the governor of the central bank. We can win by 2040, but we need to recognize the character of the decade – he said, then noted that we should return to the previous, successful recipe. This decade is “prone” to wars and inflation, so it will be necessary to return from the “wrong path to the right path”.
A complete economic turnaround is needed, now!
– he emphasized, adding that it is necessary to play on the strengths instead of the weaknesses. “And the whole country is playing on weak points. It is important to build green Chinese capacities, Péter Szijjártó did an excellent job, but it alone will not solve Hungary’s competitiveness problems,” he said. According to him, a strategic redistribution of resources is necessary. We need balance and sustainable growth, we need to improve competitiveness and expand productivity, he explained.
A shock comes every decade and a half
The next speaker was Gábor Horváth, President of the Budget Council. He said that if we look at the period that has passed since the regime change, a shock comes every decade and a half, which increases the national debt, and it is a longer process to pay it off.
Romania has caught up significantly, but is the leader in research and development (R&D), and has a lower rate of innovation than Hungary’s GDP-proportional spending
– explained Horváth, noting that further upgrading will require a significant improvement in the ratio of public debt to GDP, so this must be lowered. Looking at the statistics of young graduates, he pointed out that Austria is not far behind Hungary in this regard.
There is a development gap in the country
Tibor Navracsics, Minister of Public Administration and Regional Development, took the floor and began his presentation by saying that competitiveness and regional development are related and can boost economic growth.
There are development differences within the country, territorial differences must be reduced
– explained the minister, noting that this of course means that the less developed areas will be closed off. Looking at the bigger picture, he stated that
Hungary is catching up with developed member countries.
In terms of development, Budapest already reached 129 percent of the EU average in 2004, and it is now 158 percent. At the same time, he also pointed out that there are huge differences within our country, one could say that there is a gap, which the government must reduce.
(Cover photo: Central Bank Governor György Matolcsy at the 62nd Economist Wandering Assembly on September 5. Photo: Bence Tövissi / Index)
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The Challenges of Hungary’s Economic Policy: György Matolcsy’s Warning
The recent shocks to the Hungarian economy have highlighted the country’s weaknesses, particularly in the manufacturing industry, as emphasized by Gyula Pleschinger, president of the Hungarian Economic Society. In response, Central Bank Governor György Matolcsy has sounded the alarm, warning that Hungary is at risk of losing its way in terms of economic policy.
A Two-Year Delay in Fighting Inflation
Matolcsy, who has been serving as the governor of the Magyar Nemzeti Bank (MNB), the central bank of Hungary, since 2013 [1[1[1[1][2[2[2[2][3[3[3[3], pointed out that the government’s delay in addressing inflation has led to a two-year delay in fighting this economic challenge. He emphasized that the MNB had been warning about the return of inflation since 2020, but the government failed to take timely action.
From 2021, Hungary is Losing Its Way
Matolcsy stated that from 2021, Hungary has been losing its way in terms of economic policy, with the government’s actions contributing to inflation. He criticized the government for taking steps that increased inflation, repeating last year’s mistakes. The governor highlighted the importance of the MNB’s role in making decisions based on facts and data, and its recommendations to allied state institutions to advance the fight against inflation.
Winning the Decade
Matolcsy reflected on the successes of the previous decade, which included the job protection action plan, the growth loan program, and the forintization of Swiss franc loans. However, he
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