Hungary’s budget in big trouble: grand restriction pack may come after June
Gergely Gulyás, the Minister of the Prime Minister’s Office, announced in mid-April that the Orbán government would not submit the 2025 budget draft in the spring session to the Hungarian Parliament. That is a clear sign that something is wrong with Hungary’s budget, experts believe. S&P’s latest credit rating came last Friday, and they confirmed that something decisive will come after the 9 June European parliamentary elections.
The government can rewrite the entire annual budget with a trick
Between 2010 and 2023, the Orbán cabinets submitted the first draft of the next budget until May or June, and the parliament accepted it during its spring session. That meant Hungary already had its 2023 annual budget in June 2022.
Opposition parties regularly criticised that procedure but never had a majority to vote the budget bill down. The situation was favourable for the government. Provided there was a need, they could modify the annual budget with decrees.
However, following the COVID-19 pandemic, the Russian invasion of Ukraine and the energy crisis, such modifications rewrote the entire budget. For example, the parliament accepted the 2023 budget in 2022 spring of but rewrote it fundamentally on 29 December 2022.
The Hungarian Parliament. They will not decide about the 2025 budget until November or December. Source: Facebook/Orbán Viktor
Long tradition ended
In 2024, the Orbán cabinet decided not to accept the annual budget in the spring session. Probably because the numbers are bad, and their support is at a ‘historic low’ due to the clemency scandal. In this case, ‘historic low’ means that Orbán’s Fidesz would still win the general elections but their support has never been this low since 2010.
Anyway, the government invented the idea of not accepting the annual budget before the outcome of the American presidential elections. They did not clear how that affects the budget of a Central European, EU and NATO member state.
Trump loves Hungary. But how does that affect our budget? Photo: PrtScr/FB/Orbán
S&P believes that a grand restriction may come after 9 June
Last Friday, S&P, one of the world’s three top credit rating agencies, affirmed their ‘BBB-/A-3’ ratings on Hungary and maintained a stable outlook. However, they added that high-interest costs, sluggish value-added tax revenues, and off-budget activities would pressure Hungary’s fiscal position in 2024.
S&P believes that Hungary’s fiscal slippage this year will be temporary and that public finances will improve from 2025 without threatening economic stability. One of their reasons is that they believe the Orbán “government will announce a credible consolidation agenda in the second half of 2024”.
We will pay a fortune on debt interests
444.hu highlighted that the Hungarian government will have to spend every eighth income forint on the general government interest expense. That significantly reduces the budgetary room to manoeuvre on noninterest items.
Budapest Airport, the new acquisition of the Hungarian government. Photo: Budapest Airport/FB
Furthermore, the media outlet draws attention to the fact that the Orbán cabinet will spend a fortune on buying Budapest Airport. Since the purchase’s financial background will be a loan, they estimated the transaction would “require at least 1% of GDP in additional central government debt uptake in 2024, on top of what the budgetary deficit proposes.”
Hungarian National Bank governor’s warning
Probably that is why the governor of the Hungarian Central Bank (MNB), György Matolcsy, sent a clear message to the government last Tuesday. The MNB’s deputy governor, Barnabás Virág, said in a background talk that the government should concentrate on reaching its deficit goals.
Photo: facebook.com/jegybank
We can easily understand the second part of the sentence not articulated by Mr Virág: the government should not start distributing money between the people to win the 2024 EP and municipal elections because that would make Hungary’s budget collapse.
Instead of money, we should expect at least a significant fiscal correction and restrictions after the 9 June elections if we take S&P’s prognosis seriously.
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2 Comments
Let’s defer the bad news until after the European Elections, shall we? Power to the Politicians! Fighting for Hungary – as they’ve spent us into a hole. Let’s buy an airport! Fund a railway without a robust business plan (make the terms a State Secret – why not), increase pensions, build another stadium, etc.
Oh – and EU – please send us money so we can increase teachers, doctors, and nurses salaries!
All is well in the Land of Milk and Honey…
Finance Minister of (9) nine years – Mihaly Varga, of the Victor Orban led Government, as Prime Minister of Hungary, the Fidesz Government of Hungary – what a EMBARRASSMENT goes on exhibiting from FACTUAL exposed KNOWLEDGE – the Humiliation, policies, from Mihaly Vargas his desk, from his Ministerial Portfolio of Responsibilities – on Hungary.
Failure – that we Hungarians are SUFFERING through the WRONGFULNESS of Financial and Economic Policy making, originating from the Minister of Finance – Mihaly Varga and APPROVED by the current Prime Minister of Hungary – Victor Orban.
Be MINDFUL and watch – from our homes, in Cities, in Villages or Hamlets we live across the “lands” of Hungary – be MINDFUL and aware – the ORBAN use of PROPAGANDA – “riddled” and it will grow increase – in being of FABRICATION of TRUTH & Fact.