Finance Minister explains why the Hungarian economy is strong

Hungary’s financing needs can be met next year and the budget is on a stable footing, Mihály Varga, the finance minister, told a press conference on Monday.

Even amidst the poor international environment, the government will be able to continue cutting the budget deficit and the public debt, the minister said, adding that the former will be reduced to 3.5 percent in 2023 after 4.9 percent forecast for this year, while the public debt will fall from 76.8 percent at end-2021 to 74 percent by the end of this year.

Varga said the 2023 budget will be redrafted by the end of the month — though sticking to the same deficit target — to take into consideration “a different economic path” ahead which envisages bypassing a recession and achieving growth of 1.5 percent. This would come after expected growth of 4.5-5.0 percent this year.

He said energy costs had added 4,000 billion forints to the public finances.

At the same time, he said there was record employment and a jobless rate which is among the lowest in the European Union. Growth, he added, was still above the EU average and Hungary’s tax system was internationally highly competitive. Investments, he said, were robust and the balance indices have improved thanks to government action taken during the year.

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The minister said that whereas 10 years ago, more than half of Hungary’s debt was FX, today this has been lowered to 25 percent. Meanwhile, the level of foreign ownership in the country’s businesses has fallen from 75 percent to 50 percent, he added.

Whereas the amount of state bonds in the hands of Hungarians has fallen somewhat this year, domestic financing of the national debt is still the highest in Europe, at 20 percent, Varga said.

Regarding plans ahead, the minister said a series of foreign currency bond issues worth 4 billion dollars are planned for next year together with refinancing of foreign currency bonds worth 1 billion dollars.

EU recovery funds are also expected to underpin Hungary’s public financing, Varga added.

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