By: V4 Agency
The Hungarian prime minister addressed a high-level conference on economic policy in Hungary on Wednesday. Among other issues, Viktor Orban spoke about how Hungary must adapt to the pursuit of security which will characterise the post-crisis period. He emphasised that the ongoing economic protection phase is winding down, ushering in the phase of restarting the economy, which warrants the creation of two new operative boards. PM Orban also spoke about the possibility of new, unprecedented tax reliefs in the country’s economic history.
Following contributions from Gyorgy Matolcsy, Governor of Hungary’s Central Bank, Finance Minister Mihaly Varga and Hungarian Chamber of Commerce and Industry Chairman Laszlo Parragh, PM Viktor Orban addressed the conference titled “Hungary Restarts!” Wednesday morning.
At the beginning of his speech, the Hungarian prime minister emphasized that the key question is how much growth will be achieved and when Hungary will return to the previous growth level. “The figures we just heard are startlingly high,” he said, adding that the Hungarian Central Bank (MNB) projects a 6 per cent growth for 2021.
PM Orban pointed out that a drawn out post-Covid syndrome should be prevented from afflicting the economy. He highlighted that full employment rates can offset the uncertainty caused by the pandemic, and added that the current moratorium scheme on loan repayment will remain in place until September to also help achieve this end.
Another key question is when we will see the budget turn a surplus, the Hungarian premier stressed, saying that although setting this target is important, for the time being, it is not possible to drastically cut the budget deficit which increased in the wake of the coronavirus crisis. “The government is calculating with a deficit of 7.5 per cent this year and has targeted 5.9 per cent for next year,” he said, noting that achieving a deficit of 3 per cent next year, would be too drastic for Hungarian households to withstand.
PM Orban also spoke about the need to offset the impact of the interest rate hike for Hungarian SMEs and that of the MNB’s decision to phase out its entrepreneurial lending scheme. He added that the smallest businesses should be supported with affordable loans financed from the budget, with interest rates not higher than 0.5 per cent. The Hungarian premier went on to say that raising the minimum wage to 200 thousand Hungarian forints (575 euros) is in the government’s sights, which also entails providing resources or tax breaks otherwise the burden would crush the SME sector, potentially leading to unemployment. The prime minister called for a comprehensive agreement on the issue of minimum wage.
No one has seen a pandemic paralyse the entire globe, PM Orban remarked, highlighting, however, that everyone in Hungary did their utmost to withstand and persevere in the crisis. Both medical professionals and educators adapted to the situation quickly. Family bankruptcies aren’t running rampant, he stressed. Although he admits it was difficult for businesses, the employment figures show, on average they too, weathered the storm. Today, the number of employed is over 4.5 million, and this is 50 thousand less than in the same period in 2019. This needs to be made up for, and an additional 50 thousand extra jobs need to be created, the premier added.
The Hungarian PM explained that the crisis cannot be addressed in a normative manner. To this end, two new operative boards have been established: one responsible for restarting the economy – led by Foreign Minister Peter Szijjarto and the other for restarting societal life – headed by Minister for Family Affairs Katalin Novak.
Mr Orban also noted that the foremost question is, what the economy will look like after the crisis. The Hungarian premier believes that the world and the European economies will both change to a certain extent, and that Hungary needs to adapt to this transformation wisely and well. Because the European economy is fragile, everybody wants a more secure economy, the prime minister emphasized.
A secure economy means that the Hungarian economy needs to be self-sufficient in hospital equipment, medicines, and vaccines, and the entire spectrum of these production lines need to be built up in Hungary, he added.
We must also focus on the “eastern” leg of our economy, the premier said in reference to security. Mr Orban thinks the global economy’s centre of gravity is gradually shifting eastwards, and Hungary, due to its size and population, inevitably relies on export. “Japan, South Korea, China, Indonesia, Vietnam – these are the markets we need to operate in, because this is where the money will be,” the PM forecasted.
Regarding the Budapest tourism sector being 90 per cent reliant on incoming foreigners, he pointed out that a transformed model is needed. According to Mr Orban establishing a capacity catering to domestic tourists is necessary.
The premier noted that the primary goal is to achieve total employment. For that, more jobs need to be created than the number of employed, as this way everyone can find their place in the market. Migration, even within the country, is detrimental. In the next seven years, this aspect should be a decisive factor. Regarding the next seven-year EU cycle the PM emphasized that the allocation of resources should go entirely to the least developed regions, “we do not want to create mega cities,” he noted. Mr Orban also stated that the government would not back down from reinstating the 13th month pension [a form of annual support to pensioners].
The Hungarian PM also noted that families with children had also been hit hard by the past pandemic period, and concluded his speech by mentioning the prospect of a tax relief never before seen in the country’s economic history. Mr Orban announced that at the next cabinet meeting he will propose his plan – contingent on achieving 5.5 per cent growth in 2021: in January or February next year, parents with dependent children are to be refunded their personal income tax paid in 2021 up to the amount of the average income. This would amount to 550-580 billion forints (1.6 – 1.7 billion euros), according to the premier.