Economic turnaround already seen in Hungary, says minister

The economy’s turnaround is clear to see in eight areas: employment, consumption, the car market, construction, lending and the housing market, tourism, and in real wage growth, Márton Nagy, the national economy minister, told an economic policy forum on Saturday.

Nagy said the Hungarian economy’s biggest short-term challenge was inflation, which was 5.5 percent in January, while food inflation was 6 percent and rising further in February. “So food inflation must be dealt with,” he added.

The government’s plan focuses on voluntary price and profit-margin curbs and official price curbs, he said, adding that the latter measure would be the most effective of the three but was “a long way off”. The minister said that two of the six major retail chains had given real commitments that pointed towards food price reductions.

Action, however, must be taken against price hikers, he added. Meanwhile, VAT refunds for groups most affected by food inflation should be considered, he said. The government is ready to refund 10,000-15,000 forints to pensioners for vegetables, fruit and dairy products from the second half of the year, he added.

Nagy said the rate of wage growth had exceeded inflation by 8.7 percentage points last year. Referring to the current three-year wage agreement, the minimum wage is increasing by 9 percent this year and by 13 next year, he said, adding that a 14 percent rise would take place in 2027.

Hungary, he said, ranked 18th in Europe based on the basic minimum wage and guaranteed minimum wage. With a minimum wage of 1,000 euros, Hungary would be in the mid-field, he added. Nagy highlighted the importance of improving productivity, noting the yawning productivity gap of Hungarian large companies and SMEs, among the biggest gaps in the EU.

Citing a recent business survey, he said IT developments were seen as key in terms of improving productivity, and the government “must also focus on this”. The Szazadveg survey also found that a majority of companies saw stable price levels and an increase in orders as key to bettering their situation. Lending would aid a jump in productivity, he said, adding: “This government has always stood behind you.” At present, half of loans to SMEs are subsidised, he noted.

Meanwhile, noting the “extraordinary” re-emergence in Hungary of foot-and-mouth disease, the minister warned that addressing the problem was urgent, and the virus could affect pork and milk prices. Money in the budget will be freed to compensate producers, he added.

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