Page 12 - bne_newspaper_January_12_2018

Central Europe
January 12, 2018 www.intellinews.com I Page 12
Hungarian central bank governor calls for competitiveness drive
bne IntelliNews
Hungary needs GDP growth of at least 2-3 pps higher than countries in Western Europe for a sustainable period in order to catch up, Magyar Nemzeti Bank governor Gyorgy Matolcsy said on January 11 in an interview to business weekly Fi- gyelo, which named him Man of the Year.
“We are still far from reaching that goal”, he added. Matolcsy repeated the need for a turnaround in competitiveness for the sake of convergence, a key of which will be the further reduction of the personal income tax and overhaul of the state institutions.
Matolcsy has long called for improving the coun- try's competitiveness, which has been lagging behind regional peers, as a strategic goal a to ensure sustainable growth.
The central bank governor has been an advocate of reducing the flat income tax rate from 15% to below 10%, but the response from the economy minister had been that it would create a big gap in tax revenues, Portfolio business website reports.
The MNB carried out monetary easing while reduc- ing its balance sheet, unlike some other central banks, with the use of an innovative and targeted set of tools that has proved efficient, he said.
Inflation will reach the 3% level sustainably in mid- 2019. In order to achieve this goal, it is important to keep the base rate at record low levels (0.9% at present) and the interbank rates close to zero.
Matolcsy also highlighted the impact of lower yields on financing costs. Monetary policy meas- ures contributed to half of Hungary’s economic growth between 2013 and 2016 and it has helped to reduce debt service costs by HUF1.6 trillion (€5.2bn) in four years, HUF600bn in 2017 alone.
The MNB does not have an exchange rate target for the forint, but it sees stability as a foremost priority. The Hungarian currency was ranked in the top 10 global currency in terms of stability last year to the euro, he added.
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