Government shared how they would deal with economic challenges

The public utility price cut protection fund and the defence fund are necessary to ease the burden on families, preserve the government’s achievements and, in response to the war situation, to guarantee the country’s peace and security, Finance Minister Mihály Varga told public broadcaster Kossuth Rádió on Sunday.

Varga noted that in 2019, before the outbreak of the pandemic, the budget projected a 1 percent deficit but the numbers had to be revised due to the crisis. High energy prices, rising inflation and the increasing interest expenses of the debt service have significantly increased expenditures, he said, but the government is committed to restoring fiscal discipline.

Next year’s draft budget will ensure that both the deficit and the government debt will fall in 2023, to 3.5 percent (of GDP) and 73.8 percent, respectively,

Varga said.

The public utility price cut protection fund and the defence fund are planned for two years, 2022 and 2023, he said.

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The public utility price cut fund is projected to total 670 billion forints next year and the defence fund 842 billion forints. With the latter, Hungary will achieve its goal set earlier as a NATO commitment of spending at least 2 percent of GDP on defence by 2024 already next year as defence expenditures will well exceed 1,300 billion forints, Varga said.

Varga said Hungary’s public utility price cut scheme, in place since 2013, is facing a great challenge now due to high energy prices and inflation.

The government has decided to maintain this system; payments from the public utility price cut fund must serve the purpose of maintaining energy prices at their current low level for families, he said.

He said that negotiations are still ongoing on the recovery fund with the European Union, but he was confident that an agreement would be reached. On the other EU-related issue, the seven-year budget, he said the negotiations could be completed by the end of July so those funds can already be reckoned with in the 2023 budget, he said.

Finally, Varga said both monetary and fiscal policy are aiming to curb inflation as much as possible;

the government expects the rising trend of consumer prices to come to a halt and next year’s budget envisages inflation between 5 percent and 6 percent.