The Hungarian economy will have to transition to an existence without EU funding – Márton Nagy

The price freezes will not be lifted for the time being, but why should they be, and inflation will be down to single digit figures by the end of the year, Márton Nagy, Hungarian Minister for Economic Development, told Világgazdaság in an interview evaluating his past year on the job. The paper also asked about the attraction of foreign direct investment (FDI) and whether it can replace EU funds, and the Minister for Economic Development said that it can, and is even better than EU funds.

"In terms of form, both are foreign currency and are non-repayable. When capital moves in and builds a factory, sooner or later it will need to be developed again and again, so the value will stay here. Picking up a factory from one day to the next, dismantling it and moving it to another country is not something that's done. In terms of impact, however, FDI is better: the market distributes the capital, we are not the ones to determine it, so it knows exactly "what it has to do," Márton Nagy said. He also added that although there are EU funds missing from the Hungarian economy, “they are not dominant in financing the economy. It is an easily replaceable source.”

In the mid to long term, he said, "we will operate without EU funding anyway, at a higher level of development, and above a certain level of development we will become a net contributor by default. Either way, the Hungarian economy will have to make the transition to an existence without EU funding."

This doesn't just mean FDI, but also sources of credit and capital.

During the conversation, the government's recently introduced new rules on sovereign bonds were also discussed. Nagy said that the budget remains tight due to interest costs, and that the government has "the task of getting out of the interest rate trap quickly, by bringing down inflation and strengthening the sovereign bond market. The financing of the state is stable, it's not about that, it's about the cost," he said.

In his opinion, the new sovereign bond rules do not tax savings, but "we are steering the population towards forms of saving where money retains its real value. There is also the issue of self-financing as a strategic objective. The percentage of foreigners is growing again, while it would be more important to finance ourselves domestically, with a predominance of domestic residents and institutional investors." When asked about the criticism that came from the Banking Association, said he did not agree that the recent measures would have a distorting effect on competition. “This is because currently, there's no such thing as price competition, there is simply nothing to distort, the very term price competition doesn't exist.”

Asked whether what he said might be in contradiction with the EU's economic policy recommendations, Nagy said he felt that it didn't matter what they did. "It's a good thing they don't tell us what to do here. I find the idea about the lifting of price freezes, which the Hungarian Central Bank is pushing for, quite funny. On the one hand, the most important price freeze is the cut in utility bills, which has been protecting millions of Hungarian families from poverty since 2013, so why should it be phased out? But so is the interest rate freeze, which has put hundreds of thousands of families in a safe position," the Minister for Economic Development said.