Important meeting helped forint

Cooperation between the government and the central bank will contribute to inflation falling into the single digits by the end of the year, lower interest rates, improving economic indicators and the return of robust growth, the finance ministry said in a statement on Friday after another meeting between Finance Minister Mihaly Varga and National Bank of Hungary (NBH) governor György Matolcsy.

The Hungarian forintstarted to fall yesterday following Foreign Minister Péter Szijjártó’s Wednesday remarks about a possible Hungarian block concerning EUR 500 million in EU financial assistance to Ukraine. Moreover, Hungary will not support further sanctions against Russia. The currency exchange rate was at almost 380 yesterday afternoon (we wrote about that HERE). Thankfully, the Hungarian central bank’s governor and finance minister Mihály Varga met yesterday, and the forint began to increase again. Now it stands at 375. However, that is higher than its average rate these weeks (368-370/EUR), and the events clearly show how vulnerable the forint is.

The talks between the two leaders focused on next year’s budget, which the ministry said would guarantee Hungary’s security, protect families, pensions and jobs, as well as the cap on household utility bills. Varga and Matolcsy were in agreement that disciplined policies and the reduction of the budget deficit and the public debt could put the country’s economic growth back on track next year, the Hungarian News Agency (MTI) wrote.

Accordingly, next year’s budget targets a deficit of less than 3 percent of GDP and aims to reduce the public debt-to-GDP ratio below 67 percent. It assumes a GDP growth rate of “around 4 percent”, the statement said. The government and the central bank aim to push inflation into the single digits by the end of the year, reduce interest rates and protect the economy from recession, the ministry said. Varga and Matolcsy last met in April, when they agreed to hold consultations on strategic matters on a regular basis.