The government will certainly wait for the results of the American presidential election in November, as well as the credit rating review at the end of the year, according to the current status of which, Hungary’s classification is at the lowest level of the category recommended for investment, reports Bloomberg.
According to the article, the pattern of election preparation will not differ greatly from the one used in 2022, but then the personal income tax refund for those with children stimulated the highest inflation in the European Union, which caused a recession for the Hungarian economy and led to a livelihood crisis that continues to this day.
Bloomberg claims in its article that the government spent a year and a half before the 2026 elections, which will increase the deficit. Nevertheless, Viktor Orbán supports this because his election victory can be assured, just like in 2022.
A spokesman for the Ministry of Finance declined to comment on the Bloomberg article. Finance Minister Mihály Varga is scheduled to speak on budget policy at the Traveling Economists’ Assembly on Friday.
During the epidemic, the budget deficit and the central bank base interest rate disappeared
However, the Hungarian budget remained strained, as the deficit was 6.7 percent. In addition, the European Union is withholding 20 billion euros, and economic growth is stalling, and the forint is not strengthening enough.
The market reaction in 2022 was so severe that the central bank was only able to avoid a currency crisis by raising interest rates to the highest level in the European Union. Since then, it has been reduced from 18 percent to 6.75 percent, although the central bank base rate is still the highest in Hungary.
György Matolcsy, the president of the central bank, condemned the government’s budget policy. “It is unacceptable and life-threatening to carry such a budget burden throughout this decade,” he said at a conference. “It always starts with a good deficit forecast at the beginning of the year, and then you have to correct it.”
Consolidation in 2024, peace budget from 2025?
The government announced a consolidation plan in 2024, which includes, among other things, the postponement of certain investments and the special corporate tax. Despite this, the European Commission hit Hungary with an excessive deficit procedure in June and demanded measures to avoid possible fines.
The government is trying to reduce the economic deficit and smooth out political and corruption scandals, the latter of which increase the support of the opposition. The Tisza Party came from nowhere, but achieved nearly thirty percent of the results in the EU elections in June.
The Prime Minister stated in July that he intends to double the amount of the personal income tax discount for those raising children by 2025. In addition, it launches a state-supported loan program for professionals and provides assistance to small businesses. In addition, additional tax benefits can be announced for the purchase of an apartment.
According to the Ministry of Finance, the economic recovery plan does not endanger the budget. The expected deficit will decrease to 4.5 percent in 2024, 3.7 percent in 2025, and 2.9 percent in the year of the election. According to the government’s plans, the set deficit target can be met, if only the market situation does not force it to make a correction.
The budget deficit increased drastically during the pandemic, but the Hungarian government is expecting a lot from the American elections in November and is hoping for the victory of Donald Trump. They believe that this will quickly end the Russian-Ukrainian conflict, and then they could introduce a peace budget.
According to Mihály Varga, the Bloomberg article is fake news
Finance Minister Mihály Varga commented on the economic paper’s article in a Facebook post. In his post, the head of the department stated that “according to Bloomberg, the Ministry of Finance did not wish to comment on the article”. To this, he added that in the reply of the department, he asked the journalist to send his questions. However, he did not receive this, so he responded to the news in just one sentence:
Regarding the statements in the article, the Index contacted the Ministry of Finance. In their reply, they simply wrote: “The report is fake”.
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2024-09-07 10:18:47