1 The Governor’s foreword Hungary faced a complex crisis fraught with challenges in 2020, due to the coronavirus pandemic. The events had to be tackled on several fronts. First and foremost, the largest public health challenge in recent decades had to be managed, and naturally the most important task was to protect and save people’s lives, because ‘every life counts’. Additionally, the economic impact of the coronavirus also had to be addressed, to prevent the pandemic from undermining the results achieved in the past decade or disrupting Hungary’s convergence. Crisis management was difficult, because – along with the health and economic crisis –uncertainty about day-to-day life also generated fears that had to be tackled. Another challenge was that the economic policy framework changed so significantly that one can say, without exaggeration, that during the past year we witnessed a paradigm shift in economic and financial history every day, in the world and in Hungary as well. Paradoxically, however, the pandemic also generated opportunities and thus created value, along with the losses. Most importantly, the difficult times highlighted Hungarians’ sense of solidarity. Facing these difficulties, the country joined together, creating a solid foundation to weather these challenging times. Although many issues remain to be solved, Hungary can be proud of how it managed this complex crisis, especially regarding the preservation of social stability and the mitigation of the fallout from the crisis. Several economic indicators suggest that Hungary was among the best European Union Member States in terms of crisis management. The primary objective of the central bank, to achieve and preserve price stability, was once again accomplished in 2020. Despite the shock to the Hungarian economy, inflation remained almost continuously within the central bank’s tolerance band, as in earlier years. With the MNB’s active involvement, Hungary maintained its financial stability, and the economic difficulties did not turn into financial problems. A range of extraordinary measures supported the business sector and families, as well as the government’s efforts. In 2020, the Magyar Nemzeti Bank contributed to controlling the pandemic and bolstering the financial system and the country’s budget with an unprecedented series of measures, mobilising an enormous amount of money that reached almost HUF 5,900 billion in total. The coordinated steps carried out by Magyar Nemzeti Bank in 2020 represented the largest central bank intervention and assistance undertaken in the CEE region.
In a crisis, both the magnitude and the timing of the measures are crucial. In times like this, he who gives quickly, gives twice. That is why it was crucial for the MNB to respond to the new situation in last spring, when the virus appeared, with a great degree of flexibility by international standards. From the first moments of the state of emergency, the MNB did everything in its power to harness the available resources and instruments, in order to preserve the stability of the Hungarian economy and to protect Hungarian jobs, and to set the foundations for the post‑crisis recovery of the Hungarian economy. In this regard, one source of valuable experience was that – following the monetary policy turnaround in 2013 – the Magyar Nemzeti Bank played a key role in putting the Hungarian economy back on a convergence path. The central bank utilised the lessons learnt from previous crisis management activities, while considerably expanding its set of instruments and room for manoeuvre. Thanks to this, the Monetary Council of the MNB and the central bank’s management were prepared when the crisis hit, enabling them to adopt and implement a range of coordinated and targeted measures. Among other things, these measures included immediate steps to support the liquidity of the banking system, which successfully prevented the drying up of the Hungarian credit market and the paralysis of corporate sector lending thanks to the Funding for Growth Scheme Go!, with an allocated amount of HUF 1,500 billion, and the Bond Funding for Growth Scheme. Another emblematic success of the Hungarian crisis management efforts was that, acting on the central bank’s proposal and initiative, the government introduced, and subsequently prolonged, the repayment moratorium, which has provided security and stability to debtors and Hungarian economic actors for almost a year now. The central bank also took measures to preserve the stability of the Hungarian government securities market and paid an unprecedented dividend of HUF 250 billion, to help cover the budgetary spending that increased significantly due to crisis management. Last year was an extraordinary period that required great dedication and competence from the management and staff of the Magyar Nemzeti Bank. The central bank of Hungary successfully accomplished its mission and discharged its duties set out by law in 2020. This is faithfully reflected by the Bank’s business report and financial statements for 2020. ANNUAL REPORT • 2020
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