Prime Minister Viktor Orbán has expressed optimism about Hungary’s economic policy for the next two years, saying the conditions for a stable policy were in place.
Hungarian economy
Speaking at an event on Monday organised by the Hungarian Chamber of Commerce and Industry (MKIK), Orbán said a successful economic policy required competent finance and national economy ministries as well as the backing of a commerce chamber that could cooperate effectively with the government.
He said prime ministers were responsible for making sure that economic policy “remains backed up by simple, common-sense considerations”.
One such principle, he said, was that “it is always better if others owe us than if we owe others”, and it was better to “earn more than you spend … and profit off others than have others profiting off us”.
The prime minister said cooperation between the economy and finance ministries as well as with the chamber all contributed to a stable economic policy.
Orbán noted the government was grappling with “a very high inherited debt rate”, which he said had gone from 52-53 percent to above 80 percent after the 2002 elections. The government had reined it in, he added, but “it went up again after the pandemic”.
“What’s important is that in the end, we’re lenders rather than borrowers,” he said.
Concerning the budget deficit, Orbán said “we are spending more than we earn”, and, referring to employment, he said “if we do not work we will starve to death”. All efforts must be focused on “convincing people that it is worth working”. He said that employment figures reflected the government’s successful policies in this area.
Up to 2020 Hungary was on an upward path, but then the pandemic and the war in Ukraine forced the country to “shift to lower gear” between 2020-2024, Orbán said. Now there was a chance to accelerate in 2024, he said, adding that the real economy had not suffered big problems between 2020-2024 because the government had “allowed people and businesses to make money”.
West and East
The government’s philosophy of building ties across the global economy rather than “translating an economic policy mimicking the West into primitive formulas” had also helped, he said. While the West was “stumbling”, Hungary’s eastern relations “have continued to blossom.”
Hungarian businesses are the fourth largest investor group in their own country, the prime minister said, adding that this was impressive considering “the depths from where they started”.
Meanwhile, Orbán said the economic and political map of the world “is transforming at an accelerated rate”, adding “the western and eastern parts of the world have a completely different opinion on everything”.
Referring to the war in Ukraine, he said “the West, except for the Hungarians”, had got involved in the war, while the rest of the world remained noncommittal or supported Russia. Orbán said East and West had different view on Taiwan too. “With small differences, this applies to the Middle East.” Geopolitical rivalry overrode the logic of the markets, he said. “In fact, technological developments are also determined by political considerations.”
“The outcome of the debate may be crucial,” he said, adding that “one possibility … is decoupling; that is the West separating itself from the rest of the global economy and protecting its positions because competition with the East threatens the loss of areas under Western control and even its internal markets.”
The alternative, connectivity — that is coupling East and West — could mean that “the West loses ground, but the reason for that is a lack of competitiveness; in this case, it would not attempt to use political means to stop the East from advancing but become more economically competitive,” he said.
“Europe does not even believe in its own ability to embark on internal changes … to raise the competitiveness of Western businesses to Eastern levels,” Orbán said. Should a “cold war return with decoupling”, the border between East and West would lie along Hungary’s eastern border, he insisted, adding: “We will become an uninteresting, obscure and dusty periphery of the Western world.”
With cooperation and trade, he said, Hungary would be between two worlds as a country “in which both will find opportunities”, adding that Hungarian economic policy was based on the assumption that its position between those two worlds could be maintained.
Orbán said Hungary is a part of the West, but it would not detach itself from the world’s Eastern parts, noting that Hungary is a member of the Turkic Council, cooperates with China, and it would not give up its cooperation with Russia unless the European Union’s sanctions rendered this impossible in some areas.
“West won’t win it against the Russians”
Orbán said the first lesson to be learned from the war between Russia and Ukraine was the inevitability of European rearmament.
“We don’t know how long the Americans will stay here in Europe, and we can’t guarantee our security on our own, so defence industry developments are being accelerated everywhere,” the prime minister said.
He said Hungarians’ “instincts” had been right, arguing that the country had embarked on an unprecedented military upgrade 3-4 years before the war broke out.
“So we’re ahead of everyone by 2-3 years,” Orbán said. “Politics can sometimes be a world of intuitions, not just matters of fact. This is true for both the green transition and defence industry developments.”
He said the war in Ukraine was a “proxy war”, and it was “completely obvious that the West won’t win it against the Russians”. He added, at the same time, that this was also true the other way round, and “sooner or later there will be peace talks”.
“The question is who has time on their side,” Orbán said. “We’re the only country that says that time is on the Russians’ side, so our interest lies in this conflict ending as soon as possible.”
Orbán noted, however, that “most countries in western Europe, unfortunately, believe that time is on the West’s side”. “This is an interesting train of thought if one is sitting on the shore of the Atlantic Ocean and not the Carpathian Basin.”
He said the main principle of Hungary’s security strategy was that there must always be an entity between Hungary and Russia, “and right now this is called Ukraine”.
The main question of the war from Hungary’s perspective, Orbán said, was whether Russia’s border would move closer towards Hungary, adding that if the fighting continued, the Russian border would be closer, owing to the Russian military successes.
“This is completely against our interests, but at the same time we are convinced that there’s only one way to avoid this: if the West pulls itself together and tries to achieve peace talks,” he said.
Orbán said this “won’t be as easy now as it would’ve been a year ago”, arguing that Russia now clearly had the military advantage.
Trump’s return
Meanwhile, he said, another threat to Europe was that Russia would only be willing to negotiate with the United States, and Europe’s security situation would become dependent entirely on an agreement between Russia and the US.
“So, the direct security situation isn’t looking good … and the only sane chance on Hungary’s part is to bet on President Trump’s return,” Orbán said.
Only a new player who did not have a role in the outbreak of the war could find a way out of it, the prime minister insisted, adding that the world’s only chance for “a relatively quick peace deal” was for there to be political change in the US.
“So, the question of who Hungary likes or doesn’t like isn’t one of sympathy, but about which president pursues a foreign policy that strengthens Hungarian security,” he said.
“We can’t have a say in what kind of a president America should choose, but we don’t see that the current American administration has the ability to secure a swift peace on this front,” Orbán said, adding that this was also a critical factor for the Hungarian economy.
European parliamentary elections
The prime minister said the European parliamentary elections would be significant in terms of “common sense”.
He said the European political scene was divided between “the globalists and federalists on one side and the sovereigntists on the other”. He said politics in Europe today was driven by ideology, adding that the biggest problem was that those in the key positions “tend to think along the lines of left-wing ideology, and those are the kinds of decisions they make”.
But, he said, “ideological thinking” could not keep an equilibrium between ideas and practice. He said the “triumph of ideological thinking over reality” resulted in the enactment of measures in areas like climate policy or agriculture “that seem right in principle but ruin us in the process”.
Orbán said the solution was therefore to elect a right-wing European leadership that “respects reality more”.
“There will certainly be a rightward shift towards common sense in Europe, but it’s not yet known whether this will be a breakthrough or just a change in the balance of power,” Orbán said, adding that realistically it would be the latter.
Visegrad Group
Turning to Hungary’s regional partnerships, Orbán noted that Hungary, Czechia, Poland and Slovakia had for long “thought in terms of the Visegrad Group structure”, and though this should not be abandoned, “as long as it has life left in it”, there was also an opportunity for another cooperation among “sovereigntist countries”.
This partnership, he said, included Hungary, Slovakia, Serbia, noting that there was an election scheduled for September in Austria, too. This, he said, could “easily lead to” an Austrian-Hungarian-Slovak-Serbian partnership in the coming period, which would not replace, but rather complement the V4.
Foreign investments
Meanwhile, Orbán said foreign businesses were pulling 4-6 billion euros in earnings out of Hungary, but a ban on profit repatriation would hamstring investments.
But this “openness”, he said, was not a problem if the foreign investments of Hungarian businesses generated more profits than what was repatriated by foreign companies.
Foreign investments generate an average of 1.3-1.5 billion euros in profits, and factoring in 1.0-1.5 billion euros in EU transfers, this leaves some 3 billion euros of profits in Hungary as against the 4-6 billion that is repatriated, he said.
In terms of the future, Orbán said it was important to support national holdings capable of generating profit abroad and repatriating it, mentioning oil and gas company MOL, OTP Bank, real estate, infocommunications and the defence industry as examples.
If these investments abroad can be financed and supported, and if there are entrepreneurs with competitive goods and services, they have to invest, otherwise “the balance of profits will never be restored, and we’ll always be left … feeling like we’re being exploited”, he said.
Concerning the 6.5 percent budget deficit, Orbán said there were many factors that had to be combined when it came to planning the deficit, arguing that the government did not want growth to be halted, to cut spending, risk the standard of living, or scrap family support measures or utility price caps.
Citing the finance minister, Orbán noted that the government aimed to cut the budget deficit to 4.5 percent of GDP this year, before reducing it to 3.7 percent next year and to 2.9 percent in 2026.
He said the EU economy was only just returning to a “regulated functioning” after the pandemic, noting that EU finance ministers predict that it will take four years for all member states to stabilise their budget deficits below 3 percent and their public debt levels below 60 percent.
If, for some reason, Hungary failed to cut its deficit and debt in three years, it still had another “buffer year” to do so without risking being penalised by the EU, the prime minister said.
He said it was possible to meet this target, noting that a member state that took on structural reforms had seven years to meet the budget deficit and public debt criteria again. “But we don’t trust those in Brussels enough to base our fiscal strategy on this, so let’s stick to this 3+1 year solution,” he added.
Orbán also said it was important to answer the question of “what happens if our bets don’t win”, meaning that the government’s desired political changes don’t happen in either the US or Brussels, and it takes longer to reduce the deficit.
