PM Orbán: ‘Brave, novel’ decisions needed to support growth

“Brave and novel decisions” are needed to make sure economic growth this year exceeds 5.5 percent, Prime Minister Viktor Orbán said on Facebook on Tuesday.

“If we succeed, we’ll be able to return the income tax paid in 2021 by families with children,” Orbán said. Referring to the 2020 budget passed earlier in the day, Orbán said the budget law was “a good basis but insufficient in itself” to restart the Hungary’s economy.

Orbán pledged to continue phasing in the 13th month pension and ensure personal income is not paid by people below the age of 25.

Further, an agreement may be reached with companies to raise the monthly minimum wage to 200,000 forints (EUR 569) as well as further reducing labour taxes. “This is a big task but not impossible,” Orbán said.

Hungary’s parliament passed into law the government’s 2022 budget in a final vote on Tuesday. The budget passed with 132 votes for and 26 against. The government drafted its budget bill envisaging a GDP growth of 5.2 percent, 3 percent inflation, a deficit target of 5.9 percent of GDP, as well as emergency reserves of 0.4 percent of GDP.

Targeted central revenues total 25,393.8 billion forints as against expenditure of 28,546.5 billion, with a projected shortfall of 3,152.6 billion forints. Reserves will add up to 233 billion forints.

The public debt is targeted at 79.3 percent of GDP.

According to the government’s expectations, employment will grow by 1.1 percent in 2022, net revenues will increase by 7.7 percent, and household consumption will be up by 4.8 percent.

Economic reconstruction will focus on new jobs, assistance to families with children and the elderly, as well as development of crucial economic sectors. Climate protection targets and digitisation will also be given due weight, the justification of the budget said.

Similarly to the 2021 budget, next year’s will have an economic recovery fund, this time with over 7,300 billion forints, or 13 percent of next year’s GDP. Another fund, to support social security and efforts against the pandemic, will contain over 3,600 forints.

The budget will allow for funds of 160 billion forints to phase in the 13th month pension, and 68 billion forints for pension premiums.

Doctors in hospitals and primary services will benefit from a continued payrise scheme totalling 458 billion forints.

The central budget will use 381 billion forints for housing subsidies.

The economic recovery fund will support the Paks nuclear plant upgrade project company with a 270 billion forint capital increase, as well as contribute 31 billion forints to Budapest’s Liget Project.

As opposed to 108 billion forints this year, next year’s job-seeking benefits will total 105 billion forints, while public works schemes will be financed from 120 billion forints compared with 165 billion forints this year.

Personal income tax revenues are expected to total 2,866 billion forints, compared with 2,717 billion this year.

The health insurance fund will support GP surgeries with 244 billion forints, as opposed to 139 billion this year, and 82 billion forints to dental practices compared to 42 billion in 2021. The fund’s revenues include a total retail tax of 76 billion forints and the vehicle tax of over 90 billion forints.

A 2 percentage point reduction in employer taxes

and the elimination of the vocation training contribution will bring down revenues from 105 billion forints to 68 billion. The employee tax, cut by 0.5 percented mid-next year to 15 percent, will bring in 2,454 billion forints.

Municipalities will benefit from 873 billion forints from the central budget, while they will be expected to contribute a total 129.8 billion forints in solidarity contributions. Normative financing for public education services will increase by 32 billion forints to 314 billion forints next year, while univerities operating under a new model will receive 177 billion forints as opposed to 59 billion forints this year.

In 2020, a total 4,169 billion forints will be paid out in pensions, 250 billion more than this year.

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Source: MTI