Hungary’s persistent rise in inflation is risky

It would be a mistake to underestimate the risk of a persistent rise in inflation, National Bank of Hungary deputy governor Barnabás Virág said on Thursday.

Virág noted that inflation is rife around the world partly due to rapid post-pandemic recoveries. Addressing an event organised by fund manager Aegon Alapkezelő, he said, however, inflation had already taken root in the world economy well before the pandemic. Inflation has taken off wherever economic relaunches have been robust, and this is the “price” effective recovery, he said. But recoveries could be jeopardized were inflation to become onerous, he warned.

The lesson for Hungary’s central bank is that the risk of inflation must be addressed

and safeguards put in place in case large central banks narrow their asset purchase programmes, he said.

Meanwhile, the European Commission has approved, under European Union state aid rules, Hungary’s map for granting regional aid from 1 January 2022 to 31 December 2027, the EC said on Thursday. Hungary’s regional aid map defines the Hungarian regions eligible for regional investment aid based on being the most disadvantaged regions, and establishes the maximum aid intensities in the eligible regions, the EC said. Under the revised Regional aid Guidelines (RAG),

regions covering 82.09 percent of the population of Hungary will be eligible for regional investment aid.

Such regions are all among the most disadvantaged in the EU, with a GDP per capita below 75 percent of EU average, it added. The maximum aid intensities for large enterprises in the regions of Pest, southern Transdanubia, northern Hungary and the northern Great Plains is 50 percent, and for the regions of central Transdanubia and western Transdanubia it is 30 percent. “In these areas, the maximum aid intensities can be increased by 10 percentage points for investments made by medium-sized enterprises and by 20 percentage points for investments made by small enterprises, for their initial investments with

eligible costs up to 50 million euros,”

the statement added.

“The revised RAG, adopted by the Commission on 19 April 2021 and entering into force on 1 January 2022, enable Member States to support the least favoured European regions in catching up and to reduce disparities in terms of economic well-being, income and unemployment – cohesion objectives that are at the heart of the Union,” it said. “They also provide increased possibilities for Member States to support regions facing transition or structural challenges such as depopulation, to contribute fully to the green and digital transitions,” the statement added.

Source: MTI