Central Bank Head Matolcsy: Hungary Has Failed to ‘Overtake in the Turn’

MTI-Hungary Today 2022.02.22.

Although Hungary has been more successful in managing the crisis than many of its European Union peers, it has failed to “overtake” competitors “in the turn”, National Bank of Hungary (NBH) governor György Matolcsy wrote in an article published on Monday.

By the end of 2021, Hungary was ranked 21st among the EU27 in terms of the level of economic development, down from 20th place at the end of 2019, Matolcsy wrote in the online edition of pro-government daily Magyar Nemzet.

Hungary has again been overtaken by Poland, he said, explaining that though part of this had to do with the share of the tourism sector in Hungary’s GDP, Poland had managed to jump ahead mainly thanks to the advantages of its more competitive economic model.

Fact

Prime Minister Viktor Orbán in his State of the Nation address repeated his claim that during the coronavirus crisis Hungary’s economy not only withstood the crisis but has overtaken the other countries in a corner. “During the crisis, we have trodden our own path; in relaunching the economy we have used the Matolcsy/Varga remedy, not the prescriptions from Brussels. We did not slam on the brakes and we did not make for the safety lane: we bravely overtook on the bend. We took risks. The degree of risk was not small – but you know that in truth it never is. In economic policy, sooner or later those in the “safety first” camp always end up at the back of the field,” Orbán said a few days ago.

Hungary’s crisis management outperformed mainly the bloc’s southern member states, along with the Czech Republic, Slovakia, and Romania, the NBH governor said.

Central Bank Leader Criticizes Gov’t for 'Not Taking the Best Decision' Regarding Use of EU Funds in Past Decade

"Let us learn from the mistakes of the past so that we can all be winners," Matolcsy said, concluding with a quote: "Good is the enemy of better."Continue reading

Hungary’s level of development reached 75 percent of the EU average by 2021, up from 72.8 percent in 2019, he said. This, he said, was “a far better performance” than the average rate at which Hungary had been catching up over the 30 years following 1990, and a faster rate than the annual 0.7 percentage point by which Hungary had been closing the gap on average between 2010 and 2019.

Citing preliminary estimates, Matolcsy said the crisis period of 2020-2021 had allowed Denmark to overtake the Netherlands by around 1.5 percentage points, and Sweden to jump ahead of Germany by almost 2 percentage points. Belgium has also edged ahead of Germany, while Italy has overtaken Malta by around 1 percentage point. Meanwhile, Cyprus has been overtaken by Lithuania, Estonia, and Slovenia, Matolcsy said. Spain has also been overtaken by multiple member states, with the country’s level of economic development falling from over 90 percent of the EU average to around 83 percent, he added.

Central Bank Head Matolcsy Calls for Budget to be Brought Back to Balanced Path

Matolcsy also accused the ministry in charge of competitiveness of "sabotaging ... the ministry responsible for the budget."Continue reading

“A slightly stronger performance from Hungary would have allowed it to overtake Portugal during the 2020-2021 crisis,” the governor wrote. “This would have allowed us to overtake not just our old selves in the turn, but also an EU economy that was ahead of us.”

In spite of Hungary’s successful crisis management, the last two years deprived the country of an extra 6-8 percent of GDP growth, Matolcsy said.

Featured photo by Zsolt Szigetváry/MTI