BUDAPEST: Applying treasury bill yields as the benchmark lending rates for corporate loans could curb borrowing costs for companies, top officials in Hungary's economy ministry wrote in a study published on website portfolio.hu on Monday.
Such a reform to corporate lending rates could boost economic growth and investments, they said.
A surge in inflation last year to 25 per cent, the highest in the European Union, pushed the economy into recession, forcing Prime Minister Viktor Orban's government to cut its 2024 growth forecast to 3.6% at the end of last year.
"Although the government has already taken several measures against the drop in lending, it is still below the level that is needed for growth," the officials said.
The main factor in determining the current lending rate is the central bank rate, they said, adding that the decline in lending was driven mainly by the high cost of borrowing, as local banks had strong liquidity.
"The BUBOR (Budapest Interbank Offered Rate) essentially mirrors the evolution of the central bank base rate," they said. "In contrast, treasury yields are determined by supply and demand as well as expectations of risk and yield."
Orban's government is under pressure to revive the economy as it faces a heavy 2024 election calendar and it has urged the central bank to cut interest rates more aggressively.