Provided Hungary can achieve coronavirus immunity in the first half of the year, the country could be on track for the fastest economic recovery of the past 100 years, Central Bank Governor György Matolcsy told daily Magyar Nemzet in an interview . “In the last ten years, Hungary has successfully reversed its (economic) history, which started well at the beginning of the 21st century and was dramatically ruined between 2002 and 2010. The success is due to the fact that, for the first time in the last hundred years, we have achieved and maintained a lasting formula for economic growth and equilibrium,” Matolcsy said. He added that the key to the solution was to reform the labor market and thereby achieve full employment.
Hungary lost more than a million jobs during the change of regime, to which no government was able to find an appropriate answer until 2010. Thanks to the renewed economic policy of the government since 2010 and then of the Central Bank after 2013, it was possible to increase employment by about 850,000 people until the outbreak of the coronavirus epidemic. Thus, Hungary once again became one of the leaders in the region. Hungary’s economic development has risen from 66 percent to 74 percent of the European Union average over the decade, which is a huge achievement, putting the country ahead of Poland and Slovakia. Matolcsy also said that while initially the international opinion was highly skeptical whether any country could achieve the antithetical parallel goals of fiscal stability and economic growth, Hungary proved them wrong: “Initially, many found it difficult to absorb the success of Hungarian reforms. Over time, however, the facts have been difficult to argue with,” he said. “Incidentally, market investors voted for confidence first, seeing domestic economic stability and dynamism. This is also due to the fact that in 2013 we repaid the loan received from the IMF ahead of time, and in 2016 we also repaid our EU loans. Roughly from the middle of the decade, external critical voices faded, as indicated by the upgrades.
Moreover, more and more people were interested in the Hungarian recipe. The inauguration of Chief Executive Officer Christine Lagarde at the IMF marked a historic turning point, as the IMF has since become much more open to new, innovative steps.” Matolcsy, as he also highlighted in his recently revised book Growth and Balance , stressed that a record rate of economic recovery has three prerequisites: sustained and high investment rates, replacement of the jobs lost during the pandemic with more efficient ones and not to be afraid of an increase in debt ratios. “First, the investment rate must be kept above 25 percent every year, and even increased above 27 percent from 2022, because investment is the basis for future economic growth. This will require both increased public investment and support for retail investment,” he said. “On the other hand, instead of the jobs lost during the crisis, at least the same number of jobs must be created, but more productive than before. Finally, credit-free recovery should be avoided because it is necessarily slow and protracted. Every business that wants to invest and develop and a greener family looking for a bigger home needs to be provided with cheap, affordable resources.” Title image: Central Bank governor György Matolcsy launching his new book Balance and growth.
(source: Hungarian National Bank)