What can we expect from Minister Varga?

Speaking of priorities, Varga stresses in particular job creation and economic growth. The continued reduction of the deficit and public debt will also remain important.

On growth, Varga called the latest figures “tragic.” He sees potential for modest growth coming from farming and consumption, adding “We will do everything to increase the investment rate. To this end the government keeps on signing strategic agreements with corporations.” Slow growth is certainly not helped by the low rate of lending, so the government will look for ways to encourage more lending to boost growth.

And while growth is one of his priorities, Varga has also been quite clear in his views on the value of the forint. The minister, according to Bloomberg, said the government should target a forint rate of 285 to the euro because that level offers a good balnce for both Hungarian exporters and foreign-currency debtors.

He’s not the only one who has been outspoken on the value of the forint. Péter Szíjjartó, state secretary for foreign affairs and external economic relations, sent a similar message this week. Szíjjartó says the government does not want a weak forint. It would have adverse effects on a large amount of pubic and private FX debt.

Prime Minister Orbán himself commented this week on foreign reserves and the forint’s value. Underlining that he “would leave it to the authority of the central bank governor,” the prime minister said he favors a “very cautious policy.”

“In an open economy like Hungary’s, authorities must be very cautious about using the foreign currency reserves in economic policy,” the PM said.

We should expect pro-growth leadership from Minister Varga and, despite the very speculative press report this week, as I wrote last week about the nomination of György Matolcsy, we should expect cautious, conservative leadership at the central bank because, quite simply, the country’s economic and debt position demand it.

Source: A Blog About Hungary by Ferenc Kumin