Minister talks about the Hungarian economy’s future: 3-4% GDP growth, SME program, strict rules for Airbnb, rentals

Government measures in the coming years will be determined by the three pillars of the government’s new economic policy, National Economy Minister Márton Nagy said at the Portfolio Budapest Economic Forum 2024 conference on Thursday.

25k new homes per year

Nagy noted that the three pillars of the new policy, approved at a cabinet meeting earlier in the week, were ensuring affordable housing, boosting the purchasing power of working Hungarians, and supporting SMEs with the launch of the Demján Sándor programme.

Nagy said Hungary’s third-quarter GDP would underperform the market consensus, coming in around zero, and put full-year growth under 1.5pc. He added that growth could climb over 3pc in Q1 2025, then move in a 3-4pc range.

Nagy said construction of “at least 25,000” homes a year was a “realistic goal”, as were “affordable” home prices and rental rates. He stressed that home mortgage rates had to be brought under 5pc, adding that there was nothing to stop runaway “home inflation”.

GDP growth will be between 3 and 6% in 2025, Márton Nagy says. Photo: MTI

He said the capital was in the midst of a “housing crisis” in which young people had to pay over 50pc or 60pc of their income for rent. He added that the government had to intervene because local councils had not resolved the issue.

Tax increase on Airbnb-type activity

He noted that regulation of short-term rentals had been in the hands of the metropolitan council and district councils, but no measures had been taken.

Nagy said the government planned to announce a two-year moratorium on licences for short-term rentals in the capital, while raising the tax on Airbnb-type activity by a factor of “four or five”.

The government also wants to ensure there are enough dormitory rooms, even though that should be the task of universities, he added.

He said raising the minimum wage to a monthly EUR 1,000 and the average wage to HUF 1 million by 2028 was achievable if wage increases could be based on economic growth.

Significant wage rise for everybody. Photo: MTI

Nagy said the details of a credit scheme for young blue-collar workers were being drafted. He added that the interest-free credit would be capped at HUF 4m.

He said the Demjan Sandor Programme aimed to double the revenue or balance sheets of SMEs. He added that an important goal was doubling the share of Hungarian-owned SMEs in exports, while upgrading their digital accessibility and easing their access to credit.

Orbán cabinet drafting 2025 budget with ‘improved outlooks’

The government is drafting the 2025 budget with “improved outlooks”, Finance Minister Mihály Varga said at the Portfolio Budapest Economic Forum 2024 conference on Thursday. Varga said the government assumed GDP growth of 3.4pc, a 4.3pc increase in consumption and 5-5.5pc higher investment volume in 2025. He added that there were no plans to introduce new taxes, noting that announcements had already been made on phasing out windfall profit taxes on airlines, pharmaceutical companies and telcos. The government calculates with gross wage growth of 8.6pc next year, while it sees retail sales climbing 4-4.5pc.

Varga said the improving primary fiscal balance would be an important condition, adding that interest expenditures would fall in 2025, from 4.9pc to 3.8pc of GDP. The government aims to bring the general government deficit under 3pc of GDP in the coming years and targets a 4.5pc gap in 2024, 3.7pc in 2025 and 2.9pc in 2026, he added. Touching on debt management, he said the aim was to keep 50pc of state debt with institutional investors and raise the share with retail investors to 25pc, while adopting a 25pc threshold for external exposure. He added that the share of debt with retail investors stood at 21pc at present, while the share of FX debt had fallen under 29pc from 53pc in 2010.

Growing household savings point to an increase in consumption, investments and borrowing in the coming years, he said. He added that consumption, climbing on the back of real wage growth, would be an engine of growth in 2025. He added that the launch of big projects would bring investments out of negative territory. Varga said a smaller deficit would support growth, as well as targeted economic and labour market development programmes.

Economic success requires confidence, cooperation

There can be no economic success without confidence and cooperation, Finance Minister Mihaly Vara said at an awards ceremony at the Vigado in Budapest late Wednesday. Varga said confidence and cooperation had allowed Hungary’s economy to triple in size, at current prices, and grow 42pc, in real terms, since 2010. He added that 1 million new jobs had been created, while wages, adjusted for inflation, had climbed by more than 50pc.

Varga acknowledged the unfavourable external environment and said Hungary’s economy could grow 1-1.5pc this year. Next year, the European Commission also expects Hungary’s GDP growth to reach 3-3.5pc, he added. Consultancy EY Magyarorszag presented its EY Entrepreneur Of The Year award to Eva Hegedus, the co-founder and chairman-CEO of Granit Bank. She will represent Hungary at the World Entrepreneur Of The Year awards in Monaco in 2025.

EY Magyarország CEO Tamás Vékási said the awards acknowledged entrepreneurs who worked not only for their own success, but for the future of the economy and society, too.

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