Finance Minister Mihaly Varga – Photo: MTI

Finance minister: Government working to maintain economic growth despite sanctions

The government's high-priority goal is to maintain Hungary's economic growth despite the negative effects of the war and sanctions, Finance Minister Mihaly Varga said on Monday.

Varga told a conference of the American Chamber of Commerce (AmCham) and the Hungarian Investment Promotion Agency (HIPA) that the cabinet measures to achieve this aim included capping the price of certain food products and petrol, freezing interest rates until the end of the year and introducing a 350 billion forint (EUR 830m) support scheme for SMEs.

Hungary’s economy expanded by 7.3 percent in the first half of this year, he said. Annual GDP growth is projected to be 4.5 percent in 2022 and even though a slow-down in expected in the first half of 2023, favourable trends are projected from the second half of the year, he added.

To maintain growth, the government lowered the 2022 deficit target to 4.9 percent from 5.9 percent, deferred government investments where possible, ordered economy at public institutions, and announced a number of consolidation measures to keep the budget balanced, Varga said.

As a “great result”, the deficit “barely grew” since May and the central budget posted a surplus in September, an achievement the government is hoping to maintain in October, he said.

Meanwhile, talks with the European Union are in “the last phase”, he said. As a result of “constructive talks”, the parties have set up an “ambitious reconstruction plan” in demographics, green transition, infrastructure and digitalisation, he said. The plans could be partly implemented by mid-November, according to schedule, which would open the way for Hungary to access the EU’s reconstruction and cohesion funds, he said.

Hungary has emerged strengthened from past crises, Varga said, adding that hopes were high that this crisis would be no different. “Although we are physically close to the war in Ukraine, our mid-term prospects are better than those of other EU countries further away,” he said, noting that Hungary’s GDP showed one of the largest expansions in the region this year.

Regarding Hungarian-US ties, Varga said the US was one of Hungary’s most important trading partners, with bilateral trade totalling 7.1 billion dollars last year. Of that sum, Hungarian exports made up 4.2 billion dollars, he added.

Over 1,700 American companies created 2,496 jobs in 2020 and another 1,000 last year, amid the coronavirus pandemic, he said. The government has signed a strategic partnership agreement with 92 of them.

The finance ministry said in a statement that employment numbers in Hungary, where the number of jobholders went up to 4.7 million from 3.7 million over the past ten years, are a “good baseline” for measures against the fallout of the war. Besides record low unemployment, investments are also in robust shape, it said.

The government is financing tax cuts and supporting energy-intensive SMEs while preserving fiscal balance, the statement said. Thanks to those measures, “Hungary’s financing is ensured in spite of deteriorating external environment, and Hungarian bonds are multifold oversubscribed at auctions,” the ministry said.

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