Hungary’s tourism and hospitality sectors are expected to be hit severely by the new coronavirus outbreak, Finance Minister Mihály Varga said late on Tuesday.
In an interview with commercial Inforadio, Varga said already up to 40-50 percent hotels bookings have been cancelled as European and Chinese guests stay away. “It will be a good result if [the sectors] come out of this at break-even,” he said.
Depending on the severity of the outbreak, the government expects Hungarian economy to grow by 3.7 percent or possibly see negative growth of -0,3 percent in 2020, Varga said.
He noted that the 2020 budget was drafted based on the assumption of economic growth of 4 percent. Reserves and the deficit were each planned at one percent of GDP, he said.
The reserves, some 490 billion forints (EUR 145.8bn) in absolute terms, can be used in emergencies, he said. However, this may prove insufficient should the crisis extend to multiple sectors, he added.
The government has asked companies to assess the effects of the virus in various sectors so it can prepare specific measures, Varga said.
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Other countries have so far only activated tools to avoid company insolvencies, he said.
The Hungarian finance ministry is looking at steps to be taken should the outbreak merely slow down the economy, and others in case of a deep crisis, Varga said. It will react to the real needs of economic players and protect the achievements of the past ten years, he said.
Some private citizens may find it difficult to pay back loans, Varga warned, and he advised caution in taking out new loans.
The finance ministry and the Hungarian government are well-informed and have the experience necessary to take immediate steps, Varga said, citing last year’s economic protection action plan as an example. Further, similar measures are being planned, he said.
Joint action by the European Union member states would be much more effective, he said, adding that he expected next week’s Ecofin meeting to tackle the issue.
Answering a question on whether the health-care system may be allocated extra funds beyond the 8 billion forints announced on Monday, Varga said financial reserves might be tapped if the scale of the epidemic warrants it. However, ensuring the operation of the health-care system is not a financial issue, he said, insisting that the Hungarian system was “more than prepared” to handle difficult situations.
The ministries have already started to plan the 2021 budget, he said. One focus point is to stabilise the growth of the Hungarian economy in a “changing world” and to keep it above the average EU growth rate, he said. The aim is for Hungary to reach 85-90 percent of the average EU economic development levels by 2030, he added.
Regarding the introduction of the euro in Hungary, Varga said Hungary “has no reason to rush”. Similarly to Poland and the Czech Republic, Hungary sees the flexibility of national currencies as an asset in the country’s ability to react to changes in European and world economy, he said.
Featured photo illustration by Tibor Illyés/MTI