Mihaly Varga - Photo: MTI

Finance Minister: Hungary pension system ‘reliable’, budget stable

Hungary's pension system is "reliable", with the government covering pension payouts, Finance Minister Mihaly Varga told parliament's welfare committee on Tuesday.

Varga said pension hikes were based on economic growth, adding that growth had to be maintained in order to preserve the purchasing power of pensions. The minister said the government had made a commitment to have pension hikes keep up with inflation.

Since 2010, the average pension has increased to 217,000 forints (EUR 571) from 97,000 forints and its purchasing power is up around 20 percent, Varga said. Next year’s budget allocates 6,540 billion forints for pension payments, he said, noting that Hungary’s 2.5 million pensioners will see a 6 percent pension rise in January.

Meanwhile, he said an international analysis of the Hungarian pension insurance system could be released soon. The report will also be evaluated by the government, with its recommendations to be put to a public debate in the first half of 2024, he added.

The functioning of the pension system must also be secured for the long term, Varga said, adding that there was no need for any urgent intervention. He rejected austerity measures, saying that the government had been against such policies even during times of global economic challenges and instead favoured job creation and price caps.

Budget stable

Hungary’s budget is stable, guaranteeing the real value of pensions, family assistance mechanisms and caps on retail energy prices, the finance minister told parliament’s budget committee on Tuesday.

Varga said the central budget also continued to provide pre-financing for EU programmes the community funding “withheld by Brussels for political reasons”. He added that the pre-financing amounted to some 1,000 billion forints (EUR 2.6bn). “The EU is causing damages to the Hungarian economy, the Hungarian budget and taxpayers by refusing to give the country the funds it is entitled to,” he said.

Referring to the state of the 2023 budget, the minister said it had been calculated with targeted economic growth of 4.1 percent in spring 2022. Figures so far have indicated smaller growth and greater inflation, while the public debt is being financed with high interest. This year’s deficit target has been revised from 3.9 to 5.2 percent of GDP, an improvement on last year’s target of 6.2 percent, he said.

The public debt will have been reduced to 70 percent of GDP by the end of the year, nearly 4 percentage points lower than last year, he said, adding that the government had taken a number of measures to reduce the deficit and the debt, such as postponing investments.

The government decided against imposing austerity measures and left family assistance mechanisms in place, he said.

Retaining Hungary’s nearly full employment “has been an outstanding achievement”, Varga said. “This also shows that there has been no economic recession, just technical recession lasting for four quarters,” the minister said.

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