The Hungarian government will carry on with its economic protection measures aimed at offsetting the effects of the novel coronavirus pandemic throughout the autumn, the finance minister told an online conference on Friday.
Surveys indicate that the second wave of the pandemic has ignited fears of bankruptcy among businesses and people are afraid of losing their jobs, Mihály Varga said, adding that this meant the government had to keep allocating significant amounts of funding to its economy protection action plan.
He added, at the same time, that the government would have to approach the drafting of the various schemes aimed at protecting key industries with the recognition that the country will have to “coexist with the virus and the situation it has created”.
The second quarter of 2021 will be a key period, Varga said, noting that the situation with the pandemic would only improve once a vaccine was available. This will be the basis for an economic recovery, which will likely be indicated by import growth and the Purchasing Managers Index, he added.
The government works to help the Hungarian economy recover to 2019 levels in two or three years, Varga said.
So far, 2,126 billion forints (EUR 5.8bn) have been disbursed from the 2,485 billion recovery fund, and payment of the remaining 359 billion is ongoing, he said.
The finance ministry forecast a 5-6 percent contraction in 2020 months ago, Varga said. The rebound many economists foresaw has not materialised, he added.
Economic sectors like tourism, manufacturing and services, previously the engines of Hungarian economic performance, have become liabilities, Varga said. At the same time, he said recovery in the labour market was an important achievement.
The state deficit is expected to jump to 76-78 percent of GDP in 2020 as a result of some 1,400 billion forints in lost income, he said. It sets Hungary back by some 5-6 years in this regard, he said, adding that skyrocketing state debt was the “price for recovering and protecting jobs”.
Hungary’s epidemic recovery package amounts to 20 percent of GDP, Varga said, and the economy protection action plan is contributing 3.7 percentage points to GDP this year.
Measures such as the moratorium on loan repayments for private debtors, and other interest guarantee schemes, are designed to maintain the financial capacities of companies and private citizens, he said. Investors have to see Hungary as good ground for investments, he added.
The government has reserves and EU funding to fall back on while continuing a stimulus-driven fiscal policy, he said.
In the future, business models adjusting to the pandemic situation will have to be developed, Varga said. As a small, open economy, Hungary will have to boost sectors that would ease its dependence on others. One such up-and-coming sector would be the health-care industry, he said.
The stability of Hungary’s government is helping the country’s recovery, he said. “We have now seen the advantages of a government with a two-thirds majority in parliament,” he said.
featured image via Lajos Soós/MTI