On Thursday, National Bank president György Matolcsy announced that the MNB would prolong the lending program which was launched earlier this year. Mr Matolcsy said that in addition to the 750 billion Forints committed so far, another 2,000 billion will be allocated by the end of 2014. Commercial banks will get the loans at a zero per cent interest rate, and will transmit them to customers at a maximum interest rate of 2.5 per cent.

In Magyar Hírlap, Csaba Szajlai welcomes the National Bank’s efforts to boost economic growth through cheap loans. The conservative economist points out that the growth rate is just about zero and thus the economy does need such a stimulus. Szajlai adds that the announced loan program may also ease the credit crunch likely to emerge in the aftermath of the conversion of foreign currency mortgages into Forint credit.

The loan program will only be successful if the cheap credit is used to finance new investments, former National Bank chief Péter Bod warns in Heti Válasz. He does not rule out the possibility that entrepreneurs will use the opportunity to replace their previous credits with cheaper loans. The cheap MNB credit will not be a silver bullet if entrepreneurs and families are reluctant to invest in such the a stagnant economic environment, the conservative economist concludes.

In a more sceptical piece in Népszava, Tamás Bihari speculates that Hungarian entrepreneurs may simply deposit the cheap loans in banks, since the yield on such deposits will exceed the 2.5 per cent margin. As a result, the economy will not expand and 40 billion Forints of taxpayer revenues will be wasted, the left-wing commentator speculates.

If the available amount is in fact to be used in 6-year loans, the project will cost a total of at least 420 billion Forints, Index.hu calculates, and adds that only one third of the subsidized loans taken up so far have been used to finance new investments.

The unsigned analysis concludes that the cost of the project is excessive and that the Forint may weaken as a result. If this happens, the National Bank will have no tools with which to intervene, since an increase in the base interest rate would also increase the National Bank’s losses on the subsidized loans, Index.hu notes. Without mentioning Index by name, the National Bank dismissed “unfounded and untrue calculations published by certain news sites”. The MNB argued that such analyses failed to subtract the yields resulting from the expected growth surplus from the costs of the project.

Source: BudaPost

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