Curbing Inflation in Hungary is Govt's Top Economic Policy Goal - More Austerity Ahead?

  • 25 Sep 2023 5:18 AM
  • Hungary Matters
Curbing Inflation in Hungary is Govt's Top Economic Policy Goal - More Austerity Ahead?
Hungary’s government, in agreement with the central bank, considers curbing inflation its most important economic policy goal, Finance Minister Mihály Varga said.

In a roundtable discussion at the opening day of the 61st Itinerant Conference of Economists in Eger, in north-eastern Hungary, Varga said the government’s measures to reduce inflationary risks were successful.

This is also reflected in the analyses of the major credit rating agencies, which are full of positive findings, he added.

Monetary and fiscal policy were kept particularly loose in Hungary in recent years, until the pandemic created a new situation for the government’s economic policy with the primary need to save jobs, keep the economy afloat and ensure that workers in the sectors hit hardest by the crisis were not left without income, the minister said.

He said the budget deficit would continue to decline this year, too, and would fall to the 2.9%-of-GDP target in the 2024 budget bill next year.

He noted that a number of big state investments had been postponed at the end of 2021, and said projects underway now could also be delayed, if necessary.

He said the government could weigh tax measures to boost budget revenue if banks book record profits this year.

The cabinet could also consider delaying acquisitions of equipment by the Defence Ministry and undertake a review of subsidised credit programmes, he added.

Opposition DK’s group spokesperson Olga Kálmán said Varga had “admitted that the budget is in trouble”.

“He suggested that further austerity might be on its way and pointed fingers at bank’s profits,” she added. Kálmán said the forint exchange rate plummeted “at the news of further austerity”.

Hungarian families and businesses cannot tolerate further austerity, she said.

The consequences of past austerity measures cannot be handled with further austerity, she added.

Finance Ministry: Budget Ensures Resources Even During Wartime

The budget ensures the resources necessary to maintain the regulated utilities price scheme for households, protect the security of the country, and defend family subsidies and pensions, even during wartime, the finance ministry said.

Hungary’s cash flow-based general government balance reached 3,298.7 billion forints (EUR 8.5bn) at the end of August, the ministry confirmed in a detailed release of data.

The deficit widened from 2,940.3 billion forints at the end of July. The central budget deficit reached 3,330.8 billion forints at the end of August and the social security funds were 93.0 billion forints in the red. Separate state funds had a 125.1 billion forints surplus.

“In addition to the extraordinary expenditures, the budget continues to pre-finance European Union programmes, the resources for which Brussels is keeping from Hungary for political reasons,” it added.

The ministry noted that spending on European Union-funded programmes came to 1,813.8 billion forints in January-August, while transfers from Brussels reached just 1,040.9 billion forints.

Expenditures related to the regulated utilities price scheme for households came to 1,085.1 billion forints by the end of August.

Expenditures on compensation for suburban and long-distance public transport reached 440.5 billion forints.

“In spite of the unfavourable international circumstances, the government remains committed to reducing the deficit and state debt level from year to year,” the ministry said.

The full-year deficit target is 3,400.2 billion forints. The deficit reached 4,753.4 billion forints in 2022.

MTI Photo: Péter Komka

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