Matolcsy warns of looming global economic crisis and calls for structural government changes
A new global economic crisis is increasingly likely and the government should start formulating a vision to catch up with the most prosperous EU member states over the next decade, the governor of the National Bank of Hungary said on Monday. (NBH), Gyorgy Matolcsy.
In an article in the online edition of the daily Magyar Nemzet, Matolcsy called for major institutional changes in the structure and functioning of government to prevent Hungary from falling into a “middle income trap”.
Despite the economic achievements recorded between 2010 and 2019, Hungary’s level of development at the end of 2019 was still below the historic high of 1936, when the country’s level of prosperity was closest to that of Western Europe. and the average of what is currently the European Union, wrote Matolcsy. While Hungary’s level of development in 1936 was around 83% of the “EU” average, in 2019 it was at 73%, he said.
Matolcsy attributed this mainly to inadequacies in the operations of the state and in particular that of the government.
“Our poor economic performance compared to our competitors over the past decade is the result of poor government performance,” he said.
Matolcsy highlighted 12 lessons to be learned from the previous decade and from the management of the current economic crisis.
He praised the operations of the Ministry of the Economy between 2010 and 2013, saying it had been effective in reorganizing the state budget and boosting employment. However, he said it was a mistake to shut down the ministry as the center of the country’s economic policy making and assign this area to the new finance ministry.
“This broke with the guiding principle of the civic political wing that economic policy cannot be guided by annual budgetary interests,” he wrote. “It is akin to the national wing which abandons the idea of the nation, of Christianity or of the family on the political scene. “
Matolcsy said the change created an “economic policy vacuum” that the prime minister and, institutionally, a general economic council had tried to fill.
“This attempt failed,” he wrote. “The National Bank of Hungary was not able to fill the economic policy vacuum from outside, and there was no institution within the government that was authorized or able to do so inside. no more.”
Although 2018 marked the start of a new government cycle, the government still lacked a single economic policy center, leaving the finance ministry to act as one, Matolcsy wrote. He welcomed the establishment of the Ministry of Innovation and Technology, adding, however, that its functions were too broad and that it was not and could not become the center of economic policy either.
Matolcsy said the NBH and the Hungarian financial system had succeeded in dealing with the economic crisis caused by the pandemic. The Ministry of Foreign Affairs “has worked very well” in dealing with inflows of foreign capital, and the Ministry of Innovation and Technology has done a good job in creating the conditions for Hungary’s growth path, he said, adding, however, that a central government “brain” responsible for analyzing economic policy was still needed. This is why, he said, Hungary’s crisis management has so far obtained only “mixed results”.