Hungarian economy shows no sign of slowdown

A well-known economic analyst praises the Hungarian National Bank’s loose monetary policy as well as the government’s fiscally conservative line. He believes that the macro environment is helping Hungarian growth and making the economy resilient to crises.

On Portfolio, the economist István Madár explains Hungary’s stabile fast growth as the result of the Hungarian government’s bold economic incentives. Madár recalls that the Hungarian National Bank realized early on that negative real interest rates will prevail, and therefore it boosts internal demand through low rate loans. This, Madár adds, helps to increase wages and also keeps the Forint weak which boosts Hungarian competitiveness. At the same time, however, the deficit is kept under control. He acknowledges that loose monetary policy may at some point create an asset price bubble, but at this point neither the inflation rate nor wage levels suggest that the economy is becoming overheated. Madár suspects that the Hungarian economy has become resilient and can maintain fast growth despite the economic slowdown in Western Europe. He is also confident that the National Bank will sooner or later start to raise the base rate.

Tags: deficit, GDP, growth, interest rate, National Bank