Mihály Varga called the phasing out of forex loans one of the most significant economic policy measures and achievements of 2015. In the speech held at the end-of-year assembly of the Hungarian Banking Association, the Minister pointed out that the timely forint conversion of forex mortgages has averted the risk of additional financial burdens for households and the entire banking sector as well. The Government – together with the Hungarian Banking Association and the National Bank of Hungary -- has prevented households, local governments and the state budget from incurring extra debt of some HUF 1000bn, the Minister stressed.

“We have achieved that the share of forex loans with the total stock of household loans is set to fall from the 73 percent peak – which had paralyzed the entire financial system -- to less than 1 percent by the beginning of 2016,” he said, adding that the share of the Hungarian owners of state bonds has also been on the rise. In June 2015, half of state debt was already held by Hungarian investors. This has been reducing the country’s vulnerability to external shocks and more and more interest payments on government debt remain within Hungary.

Hungary has recently joined the EU member states with the fastest growing economies; the level of employment has reached a record high unseen for decades. In 2014, the number of people in employment rose by 208 thousand, which was followed by an increase of 107 thousand in the initial three quarters of 2015. As a result, families’ confidence in spending has returned as they had been growing more optimistic in terms of income prospects. Retail sales grew by 5.1 percent in 2014 and by 5.8 percent year-on-year by the end of October 2015.

Speaking of challenges that the banking sector has been facing Mihály Varga said that in order to maintain or accelerate Hungary’s economic growth it is necessary to boost lending, which might be achieved basically through positive incentives. He reiterated the commitment of the Government to complying with the MoU concluded with the EBRD. The National Assembly adopted an amendment on the reduction of bank tax already at the beginning of summer, and the Cabinet will submit further amendments in line with the proposals of the European Commission.

(Ministry for National Economy)