Opposition calls for stable, strong forint

Photo: Daily News Hungary

The opposition Democratic Coalition will work swiftly to ensure a stable and strong Hungarian currency should it be elected in next year’s general election, Klára Dobrev, the party’s candidate for prime minister, said on Wednesday.

According to fresh data, consumer prices in May grew by an annual 5.1 percent, an eight-year record, Dobrev noted at an online press conference. The price of cooking oil has grown by 25 percent in the past year, the price of eggs by ten percent, and the price of fuel by 36 percent, she said, adding that a stable forint would staunch inflation.

Meanwhile, Dobrev said a government run by the current opposition would set the medium-term goal of introducing the euro, adding that Slovakia, which introduced the single currency in 2009, had witnessed much slower price rises.

Hungarian forint to reach historic all-time-low?

Matolcsy flags Central Bank rate hike as early as June

Monetary policy is set to shift towards a more hawkish stance as early as June, with a possible hike in the base rate, György Matolcsy, the governor of the National Bank of Hungary (NBH), told a conference on Wednesday.

A persistent rise in inflation would endanger the recovery, he said.

The Hungarian economy can withstand a rate hike, the governor said, adding that given the risk to the economy posed by inflation, the Monetary Council is compelled to raise interest rates.

Prime Minister Viktor Orbán told the conference that the government was aiming for the deficit to shrink to 5.9 percent of GDP in 2022, down from 8.1 percent in 2020 and a projected 7.5 percent this year.

Orbán said full employment and the loan moratorium were key steps to avoiding the long-term economic effects of the pandemic. The moratorium on loan payments was pushed back until September to allow for talks on a gradual phasing out of the measure, he said.

Orbán said the government’s aim was to raise the minimum wage to 200,000 forints (EUR 575).

However, a hasty hike could lead to small and medium-sized enterprises breaking under the strain, as well as to layoffs and to growing numbers of jobseekers rather than full employment, he said. The minimum wage hike would possibly happen in two phases, he said, alongside considerable tax cuts for SMEs.

SMEs should also be offered measures balancing the interest rate hike and the phasing out of NBH’s credit-for-growth scheme (Nhp), Orbán said. The new resources should be cheap, government-funded and carry interest below 0.5 percent, he said.

Further, low-earning parents should be able to reclaim their 2021 PIT in 2022, Orbaán said. The measure should come into force if economic growth reaches 5.5 percent, he said. The step would cost the budget 550-580 billion forints, he added.

Finance Minister Mihály Varga said that inflation was expected to stabilise around 3 percent, coming down from the currently “temporary” high rate.

Hungary’s economy protection action plan amounted to 30 percent of GDP, Varga said, adding that more than 4,000 billion forints (EUR 11.5bn) of that has been spent on investments.

The economy became more resilient to the fallout of the pandemic by the first quarter of 2021, gaining an edge over other EU member states, Varga said. The rebound is also expected to be swifter, possibly in the second half of this year, he added.

The minister noted the budget deficit had shrunk considerably in 2021, adding that it would return to the 3 percent Maastricht norm by 2024. Hungary’s fiscal policy, he added, supported sustainable growth.

The conference “Relaunching Hungary” was organised by the business daily Világgazdaság.