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Hungary’s budget deficit is skyrocketing

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Hungary’s cash flow-based budget deficit, excluding local councils, reached 1,704.5 billion forints (EUR 4.8bn) at the end of June, widening on stimulus measures, the finance ministry confirmed in a detailed reading of data on Friday.

“Recent measures, such as wage support, tax breaks and pension supplements, have left significant resources in the economy,” the ministry said. “The position of the budget this year has been impacted significantly, too, by tax exemptions and wage subsidies that went to players in hard-hit sectors until the end of May,” it added.

The ministry noted that, from June, pensioners got a retroactive inflation-linked supplement that adds up to around 26 billion forints.

“The budget continues to ensure the resources necessary for the restart of the economy: coverage required for workplace creation, for investment incentives and for tax reductions is available in full,” the ministry said.

The government aims to achieve economic growth this year of “at least 5.5 percent” through “supportive fiscal policy”, it added.

The central budget ran a 1,534.7 billion forint deficit at the end of June, the social insurance funds were by 198.2 billion forints in the red, and the separate state funds had a 28.4 billion forint surplus. In June alone, the budget deficit came to 392.0 billion forints.

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Hungary’s central bank governor plugs away at arguments for fiscal tightening

MATOLCSY György matolcsy-Hungarys-central-bank-governor

National Bank of Hungary (NBH) governor György Matolcsy reiterated and refined arguments for reining in next year’s budget deficit in an op-ed piece published on the website of daily Magyar Nemzet on Monday.

Matolcsy has said a number of times that the government’s 5.9-percent-of-GDP budget deficit target for next year is too high, while stressing that the central bank continues to move forward in a strategic alliance with the government, in spite of differences on the matter.

In the piece, Matolcsy said the more fiscal resources a state puts toward achieving recovery, the smaller the chance the return to economic growth will be sustainable, and he warned that “tipped balances will force fiscal austerity with time”.

Matolcsy said

the faster fiscal balance is achieved, the faster resources outside of the budget become available to support sustainable growth.

He noted that Hungarians have some 44 billion forints (EUR 122m) in financial assets that can be mobilised for the recovery, pointing out that the share of government securities held by domestic retail investors, at close to 25 percent, is well over the 2 percent average rate for the region.

“The lion’s share of the financial resources necessary to return to a path of balance and convergence is available in Hungary. Those resources will only become available if we first crack inflation and set the fiscal deficit at around 3 percent (3-3.4 percent), and keep it under 3 percent from 2023,”

Matolcsy said.

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Read alsoHungary crisis management yields mixed results, says central bank governor

European Commission urged to apply rule-of-law conditionality mechanism

Hungary PM Orbán

European Union lawmakers on Thursday adopted a resolution urging the European Commission to activate a mechanism in the bloc’s budget that links EU funding to the rule of law in the interest of protecting the budget and EU values.

In the resolution passed with 529 votes in favour, 150 against and 14 abstentions, MEPs expressed regret that the EC had decided to abide by the European Council’s non-binding conclusions issued in connection with the conditionality mechanism last December and “declared that it would develop guidelines for the application” of the regulation.

“The budget conditionality regulation does not require any additional clarification and rule of law breaches must be addressed as soon as possible,” MEPs said in a statement.

They said the EC’s guidelines on the application of the conditionality mechanism must not alter, expand or restrict the regulation. In order for the guidelines to add any value, they must clarify how the legislative provisions will be applied in practice and outline the methodology of the procedure.

Lawmakers also called on the EC to investigate without delay “any potential breaches of the principles of the rule of law that affect or seriously risk affecting the sound financial management” of the EU budget. “The situation in some Member States already warrants immediate action,” the resolution adds.

Commenting on the resolution, ruling Fidesz’s MEP group said that “the left is turning the European Parliament into an impromptu tribunal.”

By voting in favour of the resolution on the EU’ budget’s rule-of-law conditionality mechanism, the EP’s left-wing majority has once again declared its political intention to severely restrict Hungary and Poland’s sovereignty and help put leftist puppet governments in power that would serve the interests of Brussels.

Fidesz MEP Tamás Deutsch said Thursday’s resolution was “yet another attack on EU law, common European values and European cooperation”.

“Do not doubt for a second that we will fight for our freedom and independence,” he said.

“Hungary is a well-functioning democracy, an honest state governed by the rule of law where fundamental rights are guaranteed. In fact, people in Hungary have more freedoms than on the western half of the continent.”

Ádám Kósa, another MEP of Fidesz, said the EP’s “political rampage motivated by various interests” had “irreversibly tarnished” the prestige of the legislative body. “These processes must be stopped because these are what pose the real danger to Europe’s rule of law,” he added.

Márton Gyöngyösi MEP Politician Politikus Képviselő Jobbik
Read alsoJobbik MEP Gyöngyösi: Rule of law and democracy must be respected

Survey reveals that Hungarian standard of living is at the bottom of the EU

Many experts believe it is possible to measure the standard of living of a country’s residents by looking at the level of actual individual consumption (AIC). Based on this, Hungary is at the bottom of the European Union.

There are several indicators and data on economic prosperity. The best known economic indicator is gross domestic product (GDP). Although GDP is an important measure, experts say it is not the way to show the prosperity of a country’s economy. According to the European Statistical Office, actual individual consumption (AIC) is the best measure.

This figure shows how many goods and services are actually consumed by a given household. The AIC includes consumer goods and services purchased directly by households, as well as weighted services provided by non-profit institutions and governments, such as health and education, writes penzcentrum.hu.

The AIC shows how good the quality of public services the government provides to residents is.

Eurostat has prepared its 2020 estimate for EU countries. Eurostat uses price per share (PPS) for this purpose, which is an artificially created common conversion base. This will eliminate the differences between countries’ currencies. As a result, the much-heard, higher salary and more expensive livelihoods lose their significance. In the 27 Member States of the EU, individual consumption ranges from 61 to 131 per cent in PPS. The EU average is 100 per cent.

Luxembourg reached the highest level. Here, people live 31 per cent better than the EU average. Germany and Denmark come after Luxembourg. There were a further 6 countries where AIC was above the EU average. In 13 EU Member States, individual consumption ranged from 75 to 100 per cent. Italy, Ireland, Greece, and Romania also fall into this category.

Hungary is at the bottom of welfare statistics.

Actual per capita consumption is 31 per cent lower than the EU average. Only in Croatia and Bulgaria is the welfare of households worse. The Hungarian data has improved somewhat in the last decade, but in comparison, we are still at the bottom of the EU ranking.

Now not the time for budget cuts, says Hungarian finance minister

varga minister Hungarian finance minister

Economic policy should be focused on supporting investments, creating jobs and recovering capacities lost to the crisis caused by the coronavirus pandemic, Hungary’s finance minister said after a meeting with his Visegrad Group counterparts in Warsaw on Tuesday.

Now is not the time for contractionary measures, but for rebooting the economy, Mihály Varga told an online press conference. Cutting support to economic players too soon would slow the pace of recovery, posing a risk to families, businesses and the economy as a whole, he added.

Even with economy protection measures accounting for almost 30 percent of GDP, Hungary’s budget deficit was around the European Union average, while the public debt level was significantly lower, Varga said.

The minister expressed concern over international proposals for the introduction of a global minimum tax, saying it posed a risk of global tax increases, while the original plan to tax tech giants could fall by the wayside.

Hungary’s stance on the proposal is clear, Varga said, noting that the country rejects any plan that would force it to raise taxes and hurt its competitiveness. Hungary’s 9 percent corporate tax rate brings in investments, he said, adding that a tax increase would hurt thousands of businesses and put jobs at risk.

In response to a question, Varga said Hungary was prepared to take part in the talks on the global minimum tax plan and believed that its partners could be persuaded not to eliminate tax competition.

Hungary will make its position known at OECD and EU forums, Varga said, adding that he had also discussed the proposal with his V4 counterparts on Tuesday as well as with the representative of Italy, which holds the presidency of the G20, at last week’s Ecofin meeting in Luxembourg.

As the incoming president of the Visegrad Group, Hungary is committed to continuing the work started by Poland and to strengthening the alliance, Varga said.

The minister said the Czech, Hungarian, Polish and Slovak economies had all contracted at a lower rate than the European Union average in 2020, adding that their output would be back at pre-pandemic levels this year.

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Read alsoHungarian central bank raises base rate 30 bp to 0.90 pc

PM Orbán: ‘Brave, novel’ decisions needed to support growth

Hungary PM Orbán economy

“Brave and novel decisions” are needed to make sure economic growth this year exceeds 5.5 percent, Prime Minister Viktor Orbán said on Facebook on Tuesday.

“If we succeed, we’ll be able to return the income tax paid in 2021 by families with children,” Orbán said. Referring to the 2020 budget passed earlier in the day, Orbán said the budget law was “a good basis but insufficient in itself” to restart the Hungary’s economy.

Orbán pledged to continue phasing in the 13th month pension and ensure personal income is not paid by people below the age of 25.

Further, an agreement may be reached with companies to raise the monthly minimum wage to 200,000 forints (EUR 569) as well as further reducing labour taxes. “This is a big task but not impossible,” Orbán said.

Hungary’s parliament passed into law the government’s 2022 budget in a final vote on Tuesday. The budget passed with 132 votes for and 26 against. The government drafted its budget bill envisaging a GDP growth of 5.2 percent, 3 percent inflation, a deficit target of 5.9 percent of GDP, as well as emergency reserves of 0.4 percent of GDP.

Targeted central revenues total 25,393.8 billion forints as against expenditure of 28,546.5 billion, with a projected shortfall of 3,152.6 billion forints. Reserves will add up to 233 billion forints.

The public debt is targeted at 79.3 percent of GDP.

According to the government’s expectations, employment will grow by 1.1 percent in 2022, net revenues will increase by 7.7 percent, and household consumption will be up by 4.8 percent.

Economic reconstruction will focus on new jobs, assistance to families with children and the elderly, as well as development of crucial economic sectors. Climate protection targets and digitisation will also be given due weight, the justification of the budget said.

Similarly to the 2021 budget, next year’s will have an economic recovery fund, this time with over 7,300 billion forints, or 13 percent of next year’s GDP. Another fund, to support social security and efforts against the pandemic, will contain over 3,600 forints.

The budget will allow for funds of 160 billion forints to phase in the 13th month pension, and 68 billion forints for pension premiums.

Doctors in hospitals and primary services will benefit from a continued payrise scheme totalling 458 billion forints.

The central budget will use 381 billion forints for housing subsidies.

The economic recovery fund will support the Paks nuclear plant upgrade project company with a 270 billion forint capital increase, as well as contribute 31 billion forints to Budapest’s Liget Project.

As opposed to 108 billion forints this year, next year’s job-seeking benefits will total 105 billion forints, while public works schemes will be financed from 120 billion forints compared with 165 billion forints this year.

Personal income tax revenues are expected to total 2,866 billion forints, compared with 2,717 billion this year.

The health insurance fund will support GP surgeries with 244 billion forints, as opposed to 139 billion this year, and 82 billion forints to dental practices compared to 42 billion in 2021. The fund’s revenues include a total retail tax of 76 billion forints and the vehicle tax of over 90 billion forints.

A 2 percentage point reduction in employer taxes

and the elimination of the vocation training contribution will bring down revenues from 105 billion forints to 68 billion. The employee tax, cut by 0.5 percented mid-next year to 15 percent, will bring in 2,454 billion forints.

Municipalities will benefit from 873 billion forints from the central budget, while they will be expected to contribute a total 129.8 billion forints in solidarity contributions. Normative financing for public education services will increase by 32 billion forints to 314 billion forints next year, while univerities operating under a new model will receive 177 billion forints as opposed to 59 billion forints this year.

In 2020, a total 4,169 billion forints will be paid out in pensions, 250 billion more than this year.

Shocking new information about the Hungarian Armed Forces

military-army-emotional-family

In 2022, Hungary will spend more than a thousand billion forints on its army. The money goes mainly to force development, but a military career is not quite popular. The focus will be on the job creation program, which could offer positions to thousands of people.

Although the government has made significant improvements to the army in recent years, there are still problematic areas:

  • The rehabilitation of the infrastructure (including the barracks) is not going well, i.e. the environment of the soldiers is less than ideal.
  • The long-planned and even earlier timely development of the personal equipment used by the soldiers on a daily basis has stalled.
  • The number and composition of the men are inadequate.
  • There is a shortage of staff, especially at the lower levels.

Perhaps the most significant problem is staffing. Although the government has made significant salary increases with the introduction of the career model, soldiers still do not earn very well. The minimum net salary of a contract soldier who has served for one year is HUF 170,000, according to the summary of HRportal.

It is very difficult to get an accurate picture of military salaries, as it can vary from category to category, depending on the length of service, ranks, various additional bonuses, and more. However, the recruitment side of the Armed Forces reveals that a newly admitted civilian can receive a net salary of approximately HUF 145,329.

The 3,000-strong military recruitment could affect 1 per cent or an even smaller percentage of the unemployed — yet it seems to be publicised by the government almost as much as the wage subsidy package in the economic defence action plan, which could affect around 100,000 people.

Next-generation combat vehicles to be manufactured in Hungary − VIDEO

Orbán: Hungary aims to develop strong, modern army

In addition, in recent years, the government has imposed restrictions on the executive staff of the army, according to Napi.hu. In April, for example, it was decided that overtime ordered during the emergency state would not be included in the soldiers’ annual overtime.

In 2022, the Hungarian state’s defense budget will exceed one thousand billion forints, bringing it close to 1.8 per cent of the GDP. Hungary’s commitment to NATO is to spend 2 per cent of its GDP on its army. This has never been the case so far, though it is a rarity among other NATO members as well.

The detailed number of the members of the Armed Forces must be included in a parliamentary resolution. There is no data on the distribution of the deficit between the staff categories: according to Gyula Kovács, about 1,000 officers, 2,000 non-commissioned officers, and approximately 4-5,000 contract staff are missing.

The force has been essentially “incomplete” since the suspension of conscription in 2004.

The root of the problem is the severe distortion of the human structure of the army – that is, the imbalance in the ratio of commanders to commanded persons. Simply put:

The 14,000-strong higher-power military is contrasted with the number of 7-8,000 executives, and the administration takes most of the resources away from the executive staff,

explained Gyula Kovács, former deputy commander.

The direction of the trend does not change. The proportion of commanding bodies and their background institutions in the forces of NATO countries typically do not exceed 20-25 per cent of the total number. For us, this rate is 49.8 per cent. It is feared that the organisation’s capabilities will not grow from the billions, only its waste will increase.

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Opposition Jobbik: Hungary 2022 budget ‘Europe’s cruelest’

JAKAB Péter

A Jobbik official has blasted Hungary’s 2022 draft budget recently submitted to parliament as “Europe’s cruelest”.

“It is unparalleled on the continent for a government to fail to earmark compensation for lost wages due to the economic crisis caused by the pandemic,” Dániel Kárpát Z, the deputy leader of the opposition Jobbik party, told an online briefing on Thursday.

The government, he added, had also neglected to support troubled households while extending “no substantial form of support other than preferential credit schemes” to small and medium-sized firms.

The Jobbik politician insisted that surveys indicated the income of at least 40 percent of Hungarians had dropped during the past 12 months of the coronavirus pandemic.

He said amendments that Jobbik has submitted to the draft budget were geared towards protecting employees, with wage compensation and the reinstatement of social support schemes.

Jobbik’s amendments also include granting every company tax and contribution refunds, two-thirds of which would be used to increase wages to bring them closer to western wages, Kárpát Z said.

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Read alsoHungarian government presents the 2022 budget bill to parliament

Hungary’s budget deficit brutal high

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Hungary’s cash flow-based budget, excluding local councils, posted a shortfall of 1,144.1 billion forints at the end of March, widening from 539.7 billion at the end of the previous month, the Finance Ministry confirmed in a detailed reading of data on Friday.

The central budget ran a 943 billion forint deficit at the end March, while the social security funds had a deficit of 182.7 billion. Separate state funds were 18.4 billion in the red.

The ministry said revenue was

“significantly influenced” by the economic impact of the pandemic as well as by the payroll tax cut.

Payouts for European Union-supported projects came to 615.6 billion in January-March, while transfers from Brussels reached 150.6 billion.

State spending on pandemic protection measures amounted to 342.8 billion forints in January-March,

the ministry said.

The new ESA deficit target is 7.5 percent of GDP, the ministry said, adding that spending on pandemic and economic recovery measures should be implemented in such a way that the public debt relative to GDP is reduced at the same time.

Hungarian finance ministry submits budget amendment to parliament

Nudist beach to be built in Budapest?!

Domonyvölgy beach lake

Budapest’s citizens were asked about what would they spend the Hungarian capital’s participative budget on. Here are the most popular ideas. 

A total of 687 ideas were received for the utilisation of the available financial resources. The final decision is in Budapest citizens’ hands who can decide which project should be implemented in the Hungarian capital.

A wide range of ideas were received for proposal, including

As the Hungarian news portal Népszava reports,

many people support the idea of planting trees, cleaning public spaces and parks in Budapest.

Besides, traffic calming, new bus and bicycle lanes and various garbage issues are also taken into consideration. However, many project elements are already launched or planned by the capital, such as the flowering of Blaha Lujza Square, a time-based ticket for public transport, greening the inner courtyard of condominiums, creating a unified parking system or making the capital’s economy transparent. Also, two new types of tax have been proposed: a cityscape tax to protect old buildings and curb public advertising and a tax to regulate farmers.

Among the most peculiar initiatives, we can find the city-wide pit registration system, the nudist beach, the general error reporting application, and the “translation” of official forms for the average person.

All of the proposals are taken into consideration; some of them are even combined into larger projects.

Participative budgeting has already been used in Western Europe and has gained success, for example, in Paris. The first topic to hit Budapest was the construction of public toilets, greening and community composting.

The received proposals will be discussed this weekend. After that, Budapest citizens can vote in May for the selected initiatives. Implementation of the winning plans will begin later this year and the beginning of next year. 

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Read alsoNew metro line to be constructed in Budapest

Hungary’s central bank raises 2021 GDP forecast to 4-6 pc

national bank of Hungary -mnb nbh

The National Bank of Hungary expects Hungary’s GDP to grow by 4-6 percent this year, forecasts from its latest quarterly Inflation Report released on Tuesday show.

The central bank had forecast a growth rate of between 3.5 and 6.0 percent in its previous report released in December.

The finance ministry expects GDP to to expand by 4-5 percent this year.

The NBH puts the average annual inflation rate for this year at 3.8-3.9 percent, above the 3.5-3.6 percent range forecast in December.

The central bank sees the economy expanding by 5.0-6.0 percent next year and by 3.5 percent in 2023.

The bank’s forecasts for inflation show CPI at 2.9-3.0 percent in 2022. It left the 2023 inflation forecast unchanged at 3.0 percent.

The NBH noted that the forecast is in a range because of the uncertain economic prospects resulting from the coronavirus pandemic.

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Read alsoFour international retail chains leave Hungary due to COVID-19

Budget airlines seek EU sustainable fuel quotas for all flights

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Ryanair, Easyjet, Wizz Air and other low-cost airlines have written to the European Union asking that its plan to force carriers to use a certain share of sustainable fuels apply to all flights, not just short-haul ones.

The European Commission is drawing up targets for airlines to use a minimum share of sustainable aviation fuels (SAF), to curb the sector’s planet-warming CO2 emissions. In December Brussels shelved a draft 5% target for 2030 for being too low.

A group of budget airlines, which do not compete in long-haul markets, and environmental groups wrote to the Commission on Wednesday, asking that any SAF quotas apply not only to flights inside Europe, but also long-haul trips to and from the continent.

“Excluding long-haul flights from the SAFs mandate would mean the very area of our sector that most needs to decarbonise would not be covered at all by this legislation,” said the letter to the EU’s climate and transport policy chiefs, seen by Reuters.

Its signatories included Easyjet, Ryanair, Wizz Air, Jet2 and the non-governmental organisation Transport & Environment.

They cited data from air traffic management group Eurocontrol, which said the 6% of flights from European airports that crossed more than 4,000km accounted for half of the total CO2 emissions from flights leaving Europe.

“There is no logic in excluding long-haul flights from SAF usage obligations as this is their only possible way to decarbonise,” Ryanair CEO Michael O’Leary said in a statement.

T&E executive director William Todts said long-haul flights currently “escape regulation of their pollution despite causing the bulk of emissions”.

The signatories said SAFs are the only near-term option to curb long-haul flights’ emissions – while for short-haul, SAFs are a temporary solution, before technologies such as hydrogen-fuelled aircraft become available in the 2030s. Airbus plans to put a carbon-free plane into service by 2035.

The move may be opposed by traditional carriers, if it imposes costs on them not faced by foreign rivals. Air France KLM and Lufthansa could not immediately be reached for comment.

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Read alsoMarch brings new and resumed flights to Budapest Airport!

Biden’s $1.9 trillion COVID-19 bill wins final approval in House

BIDEN, Joe

The House of Representatives gave final approval on Wednesday to one of the largest economic stimulus measures in U.S. history, a sweeping $1.9 trillion COVID-19 relief bill that gives President Joe Biden his first major victory in office.

The measure provides $400 billion for $1,400 direct payments to most Americans, $350 billion in aid to state and local governments, an expansion of the child tax credit and increased funding for vaccine distribution.

Approval in the Democratic-controlled chamber came without any Republican support after weeks of partisan debate and wrangling in Congress. Democrats described the legislation as a critical response to a pandemic that has killed more than 528,000 people and thrown millions out of work.

“This is a historic day. It is the beginning of the end of the great COVID depression,” Democratic Representative Jan Schakowsky said.

Biden plans to sign the bill on Friday, the White House said.

Republicans said the measure was too costly and was packed with wasteful progressive priorities. They said the worst phase of the largest public health crisis in a century has largely passed and the economy is headed toward a rebound.

“It’s the wrong plan at the wrong time for so many wrong reasons,” Republican Representative Jason Smith said.

Democrats were eager to get the final bill to Biden’s desk for his signature before current federal unemployment benefits expire on March 14.

The House, which passed an earlier version of the legislation, needed to meet again to approve changes made in the Senate over the weekend.

“There’s been a lot of talk about this package being too large and too expensive, but if there was ever a time to go big, this should be it,” said Democratic Representative Richard Neal.

The House rejected an effort by Republican Representative Marjorie Taylor Greene to delay proceedings by asking for an adjournment – something she has attempted four times since taking office in January.

The House voted 235-149 to plow ahead, with 40 Republicans joining Democrats in rejecting Greene’s effort.

POPULAR SUPPORT

Although many Republicans supported coronavirus relief under former President Donald Trump’s administration, no Republican lawmaker voted for the bill in the House or Senate, although polls have shown it is popular with voters, even Republicans.

According to a Reuters/Ipsos national opinion poll, conducted March 8-9, 70% of Americans support the plan, including a majority of Democrats and Republicans. Among Republicans, five out of 10 say they support the plan, while nine out of 10 Democrats supported it.

The legislation could have high stakes for both parties. If it succeeds in giving the economy a major boost, it also could improve Democrats’ political fortunes as they attempt to hold onto their slim majorities in Congress going into the 2022 mid-term elections.

Democrats hold a narrow 221-211 majority in the House and, without Republican support, could afford to lose the votes of only a few of their members. Some Democratic lawmakers in the House had criticized the changes in the bill made by the Senate.]

The Senate had removed a $15 per hour federal minimum wage increase by 2025; tightened the eligibility for $1,400 direct payments, capping them at those earning below $80,000, cut the unemployment insurance payment to $300 per week from the House’s $400, and targeted some of the state and local government aid to smaller communities.

The massive spending push is seen as a major driver, coupled with a quickening pace of COVID-19 inoculations and a slowing infection rate, in a rapidly brightening outlook for the nation’s economy.

Private- and public-sector economists have been marking up their growth estimates, with Morgan Stanley this week pegging 2021 economic output growth at 8.1%. The Organization for Economic Cooperation and Development on Tuesday predicted U.S. growth would top 6% this year, up from an estimate of around 3% just three months ago.

With the COVID-19 aid bill now completed, attention turns to the next round of major legislation Biden aims to push, including massive infrastructure investments, immigration reforms and climate change initiatives.

While fiscal conservatives bridled at the $1.9 trillion cost of the COVID-19 bill, it could be possible to get Republican buy-in on immigration and climate change legislation in the Senate, said Paul Sracic, a political science professor at Youngstown State University.

But getting enough Republican support for Democratic initiatives to propel them to passage will be a challenge and “anything that gets 60 votes in the Senate is likely to be a problem with progressive Democrats in the House,” Sracic added.

Antony Blinken
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Annual inflation in Hungary was 3.1 percent in February

Daily News Hungary economy

Annual inflation in Hungary was 3.1 percent in February, the Central Statistical Office (KSH) said on Tuesday.

Inflation grew at a higher rate than 2.7 percent registered in January, with higher tobacco prices due to excise tax increases putting upward pressure on the index. The price of tobacco products jumped by 16.5 percent, while spirits and tobacco increased by 9.9 percent.

Prices in the category of goods that includes vehicle fuel increased by 2.7 percent, while vehicle fuel prices were up 4.6 percent. Food prices increased by 3.4 percent and the price of services rose by 1.7 percent.

Household energy prices edged up by 0.3 percent, consumer durable prices increased by 3.8 percent and clothing prices fell by 1.6 percent.

Adjusted for better comparison with other European Union member states, CPI stood at 3.3 percent.

Core inflation, which excludes volatile food and fuel prices, was 4.1 percent.

Inflation calculated using a basket of goods and services used by pensioners was 3.2 percent.

In a month-on-month comparison, consumer prices rose by 0.7 percent.

Analysts told MTI that inflation in February matched forecasts and a further uptick was likely on the back of rising fuel prices and the higher excise tax.

Gergely Suppán of Takarékbank said he expected March inflation to push above 4 percent, citing the excise tax hike among other factors. Meanwhile, fuel prices jumping from a low base would help to drive inflation to above 5 percent in April, he said.

ING lead analyst Péter Virovácz said that after a cramped supply side due to the third wave of the coronavirus, the struggle to meet pent-up demand once the country reopens would drive prices even higher.

Daily News Hungary economy
Read alsoHungary GDP falls 3.6 pc in Q4, 5 pc in full year

Hungary budget deficit EUR 1.46bn in Jan-Feb

Daily News Hungary economy

Hungary’s cash flow-based budget deficit, excluding local councils, was 539.7 billion forints (EUR 1.46bn) at the end of February, the finance ministry said in a preliminary report on Monday.

The ministry said the deficit was the result of “measures taken so far and pandemic expenditures”.

“The resources necessary for [pandemic] defence, such as the procurement of vaccines, and for restarting the economy continue to be available in the budget,” the ministry added.

The central budget ran a 505.5 billion forint deficit, while separate state funds had a 13.4 billion surplus and the social insurance funds were 47.6 billion in the red at the end of February.

The deficit swelled after running a 198.8 billion forint surplus at the end of January, the ministry said.

Government payouts linked to projects which receive EU funding came close to 481 billion forints in January-February, while transfers from Brussels came to 128.8 billion.

The ministry said that spending in January-February included 57.4 billion forints on road developments, 50.7 billion forints on competitiveness-boosting subsidies, 42.0 billion on the Modern Cities Programme, 38.8 billion on public transport projects and 28.7 billion on the Healthy Budapest Programme.

It added that spending was also impacted by the first tranche of an annual pensioners’ bonus the government is reintroducing, the extension of a wage support programme for businesses impacted by pandemic restrictions and the launch of a scheme that will raise the salaries of doctors over several years.

Daily News Hungary economy
Read alsoHungary GDP falls 3.6 pc in Q4, 5 pc in full year

Hungary GDP falls 3.6 pc in Q4, 5 pc in full year

Daily News Hungary economy

Hungary’s economy shrank by an annual 3.6 percent in the fourth quarter of 2020, slowing from a 4.6 percent decline in Q3, the Central Statistical Office (KSH) said in a second reading of data on Tuesday.

The drop was revised up from 3.7 percent in a first reading of the data released on February 16.

Adjusted for seasonal and working-day effects, GDP fell by 4.1 percent.

For the full year, GDP dropped by 5 percent.

In a quarter-on-quarter comparison, adjusted for seasonal and workday effects, GDP rose by 1.4 percent, revised up from 1.1 percent in the first reading.

On the production side, services continued to be the biggest drag on growth, accounting for 3.2 percentage points of the headline decline in Q4.

Output of commerce edged up 0.1 percent in Q4, while output of commercial accommodations and catering plunged 51.1 percent as second-wave restrictions came into force. The information technology sector’s output climbed 6.3 percent and output of the financial and insurance sector grew 3.3 percent.

Commenting on the data, Finance Minister Mihály Varga said the Hungarian economy was more resilient than that of Europe as a whole, and bounced back faster than after the crisis in 2008.

Thanks to “the past decade’s work”, the crisis found Hungary much stronger than it was in 2008, Varga said on Facebook.

Also, the government chose to handle this crisis with tax cuts, job creation and investment support rather than austerity measures, he said. The action plan to re-start the economy is expected to bring about growth of 4.5 percent this year, he said.

Analysts said

the data promised significant rebound potential and possibly faster growth in 2021 than was originally estimated.

Péter Virovácz of ING Bank expected growth of 5.4 percent in 2021. With such rebound, the economy may recover losses incurred during the pandemic by the end of 2021, he said.

Gábor Regős of Századvég Gazdaságkutató said growth may even surpass 5 percent if restrictions were lifted swiftly. If pandemic-related restrictions stayed in place for a longer period, “the consequences may be incalculable”, he added.

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Coffee shop owners complain state support is humiliating

jedermann coffee budapest

The coronavirus pandemic makes life difficult for everyone. Restaurants, hotels and other service facilities are in a particularly bad position, as they have almost no revenue during the epidemic. There is no common regulation within the European Union, so it is up to the Member States to decide how to support companies in sectors close to bankruptcy.

Hungary is not at the forefront when it comes to aiding. Tourism has completely stopped; you can only visit restaurants and cafes to take away. Decreased or completely eliminated turnover means less revenue. However, the expenses are not decreasing. The most significant of these expenditures are the wages of employees and rents.

A coffee shop in Budapest has announced on Facebook that state support had arrived. This support is not much, and the cafe owner wanted to let the public know that he feels like the Hungarian government has let them down.

Telex.hu contacted the manager of the Jedermann café, Gábor Boskovics. The cafe applied for government wage subsidies immediately after the November announcement of the grants.

The amount of the wage subsidy covers 50 per cent of the gross wage up to a maximum of 150 per cent of the salary.

Boskovics said nothing happened for a long time after the request. They first received a response in January when data corrections were needed.

At the end of January, it turned out that the payment of national wage subsidies was delayed in many cases.

In fact, no one had received any amount back then. As a result of dissatisfaction, the government said they would speed up the process. At the beginning of February, 98 per cent of the applicants were paid, according to the prime minister’s announcements.

Jedermann café house was also notified that they were eligible for the support. The amount arrived a couple of days ago. They received a total of HUF 2.1 million for a four-month period. 1.6 million of the 2.1 million aid will be deducted, as the employer is obliged to pay certain contributions on behalf of the employee.

Of the HUF 2.1 million support, HUF 40000 per person went to the employees.

The support was given for four months, which includes 12 employees. Thus, one person received only HUF 10000 (€ 28) per month. The company has not fired anyone since the start of the epidemic, but they are loss-making, their estimated loss being HUF 5 million. This is covered by incomes from the past and loans, while their only hopes are to be able to reopen around May at the latest.

Hungary continues to draw investments, says finance minister

Daily News Hungary economy

Tax cuts, a supportive business environment, well-trained work force and good security continue to draw investors to Hungary where the government focuses on investment and development, Finance Minister Mihály Varga told a meeting of Hungarian heads of missions abroad on Monday.

Although the coronavirus pandemic temporarily halted Hungary’s dynamic development, the country’s robust economy has bounced back to growth again by the fourth quarter of 2020, Varga said. As a result, Hungary’s Q4 GDP figures were the fifth best in the European Union, he said.

Despite the pandemic, investments worth a total of 2,500 billion forints (EUR 7.0bn) have been announced in Hungary since the beginning of 2020, Varga said. Rating institutes continue to recommend the country for investment, where corporate tax is the lowest in the EU and tax cuts continued during the pandemic, he said.

Regarding post-pandemic prospects, Varga said restarting the economy was conditional on achieving herd immunity through vaccination. Efforts to procure vaccines and protective gear will therefore “will never face budgetary hurdles”, he said.

Once that goal is achieved, the Hungarian economy may bounce back with a record double-digit growth, Varga said.

Foreign representations have a primary role in restarting the economy and drawing foreign investment to Hungary, he said.

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