Hungary’s central bank chief warns of risks from twin deficits

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BUDAPEST, Nov 15 (Businesshala) – Hungary’s economy has recovered sharply from a pandemic-induced shock this year, but it has been linked with a return to double deficits in its budget and current accounts, said National Bank of Hungary governor György. Mattolci said on Monday.

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Matolcsy said in an article posted on the mno.hu website that with a budget deficit and a current account deficit that is high relative to the region, Hungary is “falling into two deficit traps” that increase its vulnerability.

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“It is not only one or the other balance indicator deteriorating, but all together,” Mattolsi said, adding that the budget deficit could be around 8% of GDP both this year and the next.

“This is coupled with high inflation,” the head of the central bank said, a day before the bank held its rate-setting meeting, where it is expected to raise interest rates again.

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Matolcsy said the increase in inflation was mainly due to global factors, but higher household budget deficits fueled inflation as well as wages.

“Since the start of the COVID-19 crisis, the vulnerability of the Hungarian economy has been increasing,” he said, adding that current trends in the budget, state debt levels and the current account were unsustainable.

“Once growth is restored, an equally rapid turnaround in the financial balance is needed,” Mattolci said.

The National Bank of Hungary (NBH) is widely expected to accelerate the pace of rate hikes on Tuesday after higher-than-expected increases and inflation by Czech and Polish central banks appears to have caught the NBH off guard. .

Hungarian inflation rose to 6.5% on a year-on-year basis in October, rising from 30 bps in September to 15 bps after the rate slowed in September after challenging the NBH to harden its slow but steady outlook, and its After that there was an increase of 15 bps. October.

Reporting by Krysztina Than in Budapest Editing by Matthew Lewis

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