Hungary’s 2025 economic action plan unveiled: €9.8 billion to counter economic downturn 🔄

Although the figures and economic analysis clearly do not indicate that the government made good economic decisions in 2024, ministers now see 2025 as the big window of opportunity to emerge from the economic crisis.

The Hungarian Government’s economic policy in recent years has not shown any positive signs, with the weakening forint and inflation showing huge problems even in the most straightforward figures, and Orbán’s fight against the EU not helping Hungarian households. However, the government’s optimism has not waned, with the 2025 budget coming, which will now really boost the Hungarian economy, ministers say.

Varga: 2025 budget one of ‘new opportunities’

The government’s 2025 budget is one of “new opportunities”, Finance Minister Mihály Varga said on Monday, ceremoniously submitting the bill to lawmakers in parliament.

Varga said the “peacetime” budget reflected the government’s new economic policy. He added that outlooks were encouraging, with a “good chance” for the world to move toward peace based on the results of the United States elections.

Varga said Hungary’s GDP would grow in 2024, as higher wages boosted consumption. Based on forecasts from international institutions, Hungary’s GDP growth in 2025 could put the country among the frontrunners in the EU, he added.

The government aims to put the economy back on the growth path, while higher wages leave more money with families and SMEs are strengthened, he added.

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Varga said the budget bill aimed to support families, strengthen businesses, maintain the regulated utilities price system for households, preserve the value of pensions and ensure the country’s physical security.

The budget bill targets a 3.7pc-of-GDP general government deficit, while assuming GDP growth of 3.4pc and 3.2pc average annual inflation. Gross interest expenditures are set to reach 3.8pc of GDP.

Varga noted that the Fiscal Council had delivered a positive assessment of the budget bill and said all conditions were in place for fiscal compliance with conditions stipulated in the constitution.

Defence spending is targeted at HUF 1,753bn, or 2pc of GDP, in line with a pledge to NATO.

Spending on border protection, which has climbed to HUF 800bn since 2015, will rise by another HUF 40bn in 2025. Policing expenditures will increase to HUF 1,396bn.

The budget bill earmarks HUF 3,574bn for families with children, HUF 447bn more than in 2024. A dedicated fund for maintaining the regulated system of utilities prices has been eliminated from the budget, but HUF 880bn has been allocated for the purpose.

Pensions spending is set to grow to HUF 7,200bn, including the cost of an annual pensioners’ bonus, equivalent to a full month’s pension.

Spending on education has been raised by close to HUF 500bn to HUF 3,876bn, and HUF 3,717bn has been allocated for healthcare.

Varga noted that sectoral taxes on airlines, pharmaceutical companies and telecommunications companies had been phased out, while the advertising tax would be suspended for another year.

Reserves in the budget come to HUF 100bn.

Janos Latorcai, the deputy speaker of parliament, said the bill would be debated over 30 hours on November 27-29. The deadline for submitting changes to the bill will be 4:00 in the afternoon on November 28, he added.

The final vote on the budget is slated for December 20.

Fielding questions, Varga said the government had no exchange rate target, but the budget assumed a “technical” exchange rate of 397.5 forints to the euro. Deviations from that rate are “not a problem”, he added.

A new economic policy plan could mobilise EUR 9.8bn

The government’s recently unveiled economic policy action plan could mobilise around EUR 9.8bn (HUF 4,000bn) next year, including over HUF 2,600bn for households and HUF 1,400bn for businesses, National Economy Minister Márton Nagy said at a conference organised by think tank Századvég on Monday.

Nagy said Hungary’s GDP growth was expected to reach 0.7pc in the fourth quarter and continue to climb in the coming year. The government’s 2025 budget bill assumes GDP growth of 3.4pc, he added.

He augured a gradual improvement in external factors and said vehicle and battery production were expected to climb already on a month-on-month basis.

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UPDATE

Nagy said the government’s new economic action plan aimed to boost purchasing power, ensure affordable housing, and scale up SMEs with the Demjan Sandor Programme.

He added that the government expects the minimum wage to rise to EUR 1,000/month and the average wage to reach HUF 1m/month by 2028.

He said wage convergence needed to be based on economic growth and suggested SMEs could manage a 4-5pc increase in real wages next year by boosting productivity and consolidating.

He said around HUF 1,465bn of the HUF 2,632bn targeted for families in the action plan would come in the form of interest payments on retail government securities. He added that some HUF 3,000bn of household spending could go to the home market or be used for consumption.

The government estimates that young, blue-collar workers could take out HUF 500bn of subsidised credit next year, while doubling the tax allowance for families raising children could provide households with an additional HUF 75bn, he said. He added that HUF 300bn of voluntary pension fund savings could go toward home purchase or renovation.

A support scheme for home renovation in the country’s smallest settlements will add up to HUF 25bn, while households spend HUF 25bn of their SZEP voucher card balances on home renovation, he said.

Nagy said that out of the HUF 1,400bn earmarked for the Demjan Sandor Programme, EU-funded programmes for SMES account for HUF 650bn of the total.

He also pointed to the impact of a HUF 100bn capital programme for SMEs, HUF 150bn of Szechenyi Card investment credit, a HUF 350bn loan programme to boost the exports of SMES and HUF 50bn of funding supporting companies making foreign investments.