Prime Minister Viktor Orbán announced today that Minister György Matolcsy is the nominee for Central Bank governor to replace András Simor. The Ministry for National Economy will be headed by Minister without portfolio Mihály Varga, who was responsible for liaising with certain international financial organisations.

The nomination of the Minister came as no surprise to financial analysts and the market, who expect the bank to make further base rate cuts. According to an analyst, the nomination of Mihály Varga as economy minister is a positive message to markets because he is expected to make economic policy more predictable, transparent and credible.

Another expert said that the central bank with its new governor is likely to become more active and it is possible that the banking sector will receive medium and long-term resources with new conditions from the central bank, which may boost lending to a certain extent.

At present, the most important thing is to ensure that Hungary performs well in terms of economic growth. The necessary means to achieve this are partly in the hands of Government and partly at the disposal of the Central Bank’s Monetary Council, and they need to be harmonised to some extent, the Prime Minister stressed.

He also announced that Minister without portfolio Mihály Varga will replace György Matolcsy as Minister for National Economy. Until now, he had been responsible for talks with the International Monetary Fund and the European Union on precautionary financial assistance.

The Prime Minister noted that the Government’s economic agenda will not change. Accordingly a cut in personal income tax to below 10 percent is planned. Instead of taxing income, emphasis must be placed on taxing consumption, he added. He also reiterated that the recent dollar-based bond issue has put an end to debates about Hungary’s finances, showing that the country can stand on its own feet.

Minister Matolcsy expressed his views about the central bank in an interview in January, saying that more creative monetary measures could be used to boost economic growth without endangering financial stability or increasing inflation. At the same time, he stressed the importance of being “extremely cautious” in its actions due to the country's indebtedness and turbulent market conditions.

Governor Simor's six-year mandate at the helm of the central bank expires on Saturday. In line with the related legislation, the governor and the vice-governors of the National Bank, i.e. the internal members of the Monetary Council, will be appointed by the President of the Republic following a hearing in front of Parliament's standing committee on economic issues.

(Prime Minister's Office)