Hungary’s high inflation rate ‘temporary’, says finance minister
Hungary’s current high level of inflation is temporary and, as long as the central bank makes full use of the tools at its disposal, consumer prices may return to around 3 percent next year, Finance Minister Mihály Varga said on Monday.
The central bank has already made a move to reduce inflation, having been the first European central bank to hike the base rate, Varga said in an interview to the website of private broadcaster atv.
Varga insisted that lowering the VAT rate would not reduce prices in the long term because prices depend on market trends rather than government interventions, he said.
Since 2013, tax policy has been based on the principle that resources required for public spending such as health care, defence and education, are collected from consumption taxes rather than business and income taxes, he added.
Hungary’s tax policy is geared to boosting labour, and this is why the VAT rate is higher than elsewhere in the European Union, he said. At the same time, Hungary has the lowest corporation tax and the third lowest personal income tax in Europe, he added.
“I agree with the central bank that higher inflation is dangerous,” he said.
He added that the government supported job creation and investments, tax cuts and efforts to rebuild the economy. The resulting budget deficit will be higher, like in much of the rest of Europe, he said, adding Hungary and Poland would be among the first countries to return to the 3 percent deficit level, expected in 2024.
Commenting on the delay to the approval of Hungary’s 2,500 billion forint (EUR 7bn) recovery plan, Varga said the hurdles were political. He insisted the government’s sovereign decisions, while in line with the EU’s basic values, were not to the taste of Brussels.
“We are locked in a dispute, but let’s hope that the responses we have given to their comments will be convincing,” he said. Varga said the country’s recovery programmes would be financed by Hungary’s budget pending Brussels’ approval, even if the logjam lasts into 2022, he added.
Varga said it would be too early to make a decision on introducing the euro in the 2022-2026 parliamentary term.
The minister said he supported Hungary’s EU membership and would vote for its accession if the question were put to a referendum this year.
But, he added, Hungary is likely to be a net contributor to the EU’s budget in a decade’s time, and in this case the question would have a different complexion.
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2 Comments
Believe me, it is NOT temporary. The regime will make all citizens dependant to the government, salaries will be lowered and so will erase the middle class. Hungary will gradually lose its democracy and the republic will be turned into a fascist system. Like in russia, or turkey. The next election will be your last chance.
“Hungary’s economy would grow at a fast clip even without E.U. funds, and said, the Government has the tools to achieve G.D.P. growth of 5.5 per cent this year, triggering a tax rebate for Parents, raising Children in 2022”.
Statement on the Economy – dated 25th July 2021.
Finance Minister – Mihala Varga – these are EXPLOSIVE predictions originating from your Ministerial Portfolio.
We have seen – at or around the time of this Statement –
(1) – increase of Interest Rates.
(2) – higher un-employment figures.
(3) – increased inflation.
Question : The interest rate increase – firstly directed at attempting to Stabilize the Huf ?
Is this principally from Hungary’s “need” economically to take this decision ?
In this decision – meeting totally with your support Finance Minister – Mihala Varga – you of course would understand – this decision does IMPCT on the export markets of Hungarian Produced – Manufactured Products.
It makes there VALUE less in Export / Sale Price.
That could “ruffle feathers” in particular – the car manufacturing and associated industries that build produce and manufacture in Hungary – for EXPORT.
Inflation globally is on the Rise.
This “new age” of Economic Management – that Challenges Hungary – and the World – through the arrival and onslaught – of this novel coronavirus – on-going -requires – need – to DIFFER greatly, in ways of the past, to Economically Manage.
Inflation – will continue to rise in Hungary and Globally – until a time that it can be said – globally – the World has returned to a degree of Normality.
That normality – is still greatly distanced and in the immediate Future – (18 ) eighteen months to (3) three years – the vulnerable position of Financial Markets – Stock & Monitory Markets – Currency – and Commodities Markets -will remain – VOLATILE.
NOTHING – for Governments nor Human beings is going to get CHEAPER.
Hungary – we are in Dangerous Challenged times – and this will not disappear and will impact deep – cutting and hurting into the Hungarian Economy.
Finance Minister – Mihila Varga – you think – and the Government think – we can – Stand Alone – manage, grow into the Future – without Membership of the European Union.
Economic fundamentals and explanations arising from you and the Government – Fidesz Party – are totally on a different rail line to me – that sadly – you have Failed to look at the train route because the train you caught it’s a Dead End line – with NO exit possible.