Hungary central bank chief slams finance minister for comments on economy

[September 09, 2019]  BUDAPEST (Reuters) - Hungarian Central Bank Governor Gyorgy Matolcsy criticized the finance minister on Monday for recent comments that suggested the economy's "golden age" was nearing an end due to an expected slowdown.

In the first open conflict between Hungary's two key economic policymakers, Matolcsy said Finance Minister Mihaly Varga was wrong and the golden age would "last for decades".

"Why shouldn't we question the words of a finance minister if those run counter to the nation's desires and the plans of the government?" Matolcsy wrote in an article on the website novekedes.hu.

A spokesman for Varga could not immediately be reached for comment. The two men have been in charge of Hungarian economic policy since 2010, when Prime Minister Viktor Orban took over from a leftist government.

Varga told a business conference on Saturday that after years of strong economic growth, the economy appeared to be losing steam, although he added that the global economy was not in a recession because growth in the United States, the European Union and China was "not that bad."

He said domestic industry looked resilient despite a slowdown in EU powerhouse Germany, Hungary's key trading partner. He added that the service sector was making a growing contribution to growth, dampening any weakness in industry.

Varga appeared to rebuke a proposal by Matolcsy, made at the same venue two days earlier, when the Governor called for broad economic stimulus to dampen risks from the slowing world economy. The minister said the best way to tackle a slowdown was to maintain fiscal discipline and market stability.

"Shouldn't we make preparations if the standstill of the German economy does end up affecting us, too?," Matolcsy wrote. The Governor also criticized Varga's remarks that Hungary needed a stable and predictable exchange rate.

The forint <EURHUF=D3> hit a new record low versus the euro in late August.

Matolcsy reiterated in the article that the central bank had no exchange rate target.

(Reporting by Krisztina Than and Gergely Szakacs; Editing by Kevin Liffey and Hugh Lawson)

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