The National Bank of Hungary (MNB) published a 50-point list of proposals on its website on Tuesday. The publication aims to help the government’s crisis management and recovery due to the economic setback caused by the second wave of the coronavirus epidemic.
The declining private demand needs to be offset by accelerating government investments, increasing housing construction programs, and investment support measures focusing on the use of modern technologies. MNB proposes the introduction of a wage supplement mechanism in jobs that are the most endangered by the virus.
The list of recommendations emphasizes that the infrastructural developments have to focus on such mega-trends, digitalization, and green economy that define the 21st century.
The MNB’s 50-point list includes:
- introduction of a retraining allowance
- higher job-seeker’s allowance for the unemployed raising children
- launching programs that help the housing of young couples with small children
- the restoration of 5% general VAT in family housing with a 4% sectoral special tax
- rental housing program for young people and public employees
- multi-stage reduction of gas prices
- raising wages in healthcare and educational institutions
- accelerating Hungary’s nursery development program
The central bank is also pushing for the reform of corporate bankruptcy proceedings, rescuing endangered companies of national economic importance, as well as encouraging the raising of corporate funds through guarantee programs.
There are a great many similarities between the central bank’s new list and last years’ 330-point competitiveness program, which aims for Hungary to match Austria’s standard of living, analysts told news portal Index.
The most evident difference between the two is that the central bank’s proposals concentrate on decisions that need to be made immediately, as opposed to the competitiveness package, which represents a long-term perspective.
These are mostly just well-formulated guidelines, told Viktor Zsiday to Index. According to the investment adviser, the most important question right now is what will the government’s next step be.
“It is quite fascinating how lately everyone has a good word for the Finance Ministry,” Péter Virovácz noted.
The senior analyst at ING Bank referred to László Domokos, the President of the State Audit Office (ÁSZ), who was urging for tax cuts just a few days ago.
According to Virovácz, it seems that everyone wants to have a say in the work of the Finance Ministry. This could imply that many find the ministry’s response time quite slow.
Another problem is that the current situation could require a more loose budgetary policy.
Although the proposal pack seems reasonable, if there is no fiscal discipline, the deficit can easily escalate, and with that, the public debt could skyrocket. This would then affect the central bank as well since the pressure on the Forint exchange rate would increase while the MNB has to guarantee the price stability, K&H senior analyst Dávid Németh emphasized.
That is why a looser budget could have serious long-term costs: higher deficit and debt, Virovácz warned.
Featured photo by Zsolt Czeglédi/MTI