The Hungarian government accumulated an unprecedented deficit of HUF 1,500 billion in February. This is the worst balance ever at this time of year. There will be elections in Hungary on April 3rd. After that, there could be severe austerity whether the opposition or the current ruling party wins.

Record deficit in Hungary

Hungary reached almost half of the deficit planned for 2022 at the end of February. Minister of Finance Mihály Varga stated that the budget would need to be adjusted.

The opposition believes the government is preparing for severe austerity.

Whoever comes to power after the election will have to cut spending and increase revenue. There are several reasons for the larger-than-expected deficit. In connection with the elections, the campaign period is an extra expense. The Hungarian government has scheduled election-related payouts for February, writes Népszava.hu. Among other things, families and retirees received larger amounts of benefits.

The Russian-Ukrainian war contributes to the budget deficit in a number of ways.

On the one hand, spending on asylum and defence is significant. On the other hand, energy prices are rising drastically. The state gas supplier buys natural gas at four to five times the price it sells to the public. The Hungarian state compensates for the loss.

What will happen without an interest rate cap?

The interest rate cap affects 470 thousand Hungarian families. It is currently in force until June 30th. After that, families may experience an increase in instalments of up to 30 per cent. The central bank has introduced several measures to fight inflation.

Interbank interest rates have risen to levels not seen for 10 years.

A lot of small and medium-sized businesses can feel this. The interest rate cap protects retail customers, so they do not face higher repayment instalments. Portfolio.hu calculated that regarding interbank interest rates, an increase of 15-69 per cent would be justified, depending on the maturity. Thanks to the interest rate cap, the rise has only been 3-14 per cent so far. Housing loans are also expected to increase in price.

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Source: Népszava, portfolio.hu