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50 proposals of the Magyar Nemzeti Bank to address the impacts of the coronavirus pandemic on the economy

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In the extraordinary situation caused by the second wave of the coronavirus pandemic, the Magyar Nemzeti Bank intends to support the crisis management and economy-stimulating work of the Government with a 50-point package of proposals. Hungary defended itself successfully against the first wave of the coronavirus pandemic. The appearance of the second wave poses complex challenges in the social and economic lives unseen before. Health protection and the support of economic activity need to be solved simultaneously.

Management of the crisis requires determined and coordinated steps from fiscal policy, monetary policy and competitiveness policy. Increased uncertainty will remain typical of the operation of economies until the vaccine against the virus is developed. The delayed economic impacts of the first wave and the consequences of the second wave appear simultaneously. Measures are needed that boost the engine of the economy this year and next year as well, and at the same time are able to ensure automatic consolidation and the restoration of the main external and domestic macroeconomic balances as of 2022.

The protection of families, saving of jobs, targeted tax cuts and the acceleration of investment programmes are the most important tasks of the acute period. It is necessary to get ready for continuing the wage subsidies applied successfully during the first wave in the second wave as well. Families’ income position must be strengthened using targeted tax cuts and transfers. The temporary loss in private demand should be offset by the acceleration of government investment, expanding the home-building programmes and by targeted investment supporting measures that focus on the application of modern technologies. It is justified to introduce supplementary wages in the jobs that are the most exposed to the risks of the pandemic, whereas targeted support of the demand may help in the sectors suffering from complete stoppage. Central bank programmes continue to play a major role in the stable operation of the credit market, but, in addition, it is also worth using the institution of guarantees more efficiently.

Crisis management is change management as well. No economy will return to the pre-crisis structure as a result of the recovery. Catching up following the crisis has to rest upon the strengthening of competitiveness. The crisis management and restoration measures have to ensure a natural flow of capital and labour to more efficient areas that better meet the expectations of the future. Rapid recovery of employment may be facilitated by the extension of the tax allowances of the Job Protection Action Plan, while in infrastructural developments it is worth to put emphasis on the megatrends that determine the 21st century (e.g. digitalisation, green economy).

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