Hungary's state debt increased drastically in just one year

When PM Orbán came to power in 2010, he announced a fierce fight against Hungary’s state debt. That was successful until the COVID pandemic. Between 2020 and 2021, Hungary’s debt rose from 65 percent to 76.8 percent. After that, it started to decrease and reached 76 percent.

But that is only because of the skyrocketing inflation, Magyar Narancs wrote. And that is what Finance Minister Mihály Varga did not speak about in the latest installment of The Bold Truth About Hungary, the podcast of the government’s international spokesman, Zoltán Kovács.

Addressing tax policy, Varga said the government’s approach is not to roll out new taxes, but to broaden the tax base by reducing tax avoidance. If there are more taxpayers, they have to pay less, he added. “Paradoxically, we have been able to prove that a lower tax rate contributes to higher state revenue, while the economy has become more competitive as we could expand the system for state support and assistance,” he said.

Varga acknowledged that 2023 will be the “most dangerous year” for Hungary since the change of system, which will require “a reduction of risks and a buildup of reserves”. The government aims to create a “secure environment”, in terms of finance, too, by protecting jobs, preserving the real value of pensions and maintaining the regulated price system for household utilities, he said.

Read also: Hungarian government intentionally unleashed inflation?

He noted that foreign direct investment has reached record levels in recent years, even as taxation relative to GDP has been reduced on an unprecedented scale. A look back at the past 13 years shows Hungary’s economic model has “yielded success”, he said. While the country was “on the edge of default” in 2010, the economy grew at the fastest pace in the European Union in 2019, he added. Varga said Hungary’s goverment is “proactive” and “doesn’t just walk up and down the pitch like a referee” but shapes the match as “one of the players”.

He said the matter of demographics is “the most important issue” for Hungary, adding that if depopulation continues for 10-20 years, the economy will face “serious damage, difficult to repair”. Varga called out decision-makers in Brussels for “holding back” the country’s EU funding and putting Hungary at a competitive disadvantage.