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Orbán Gov’t’s Utility Price Cuts Already Huge Strain on Hungary’s 2022 Budget

Péter Cseresnyés 2022.04.19.

The Hungarian budget has already suffered losses of HUF 600-800 billion (EUR 1.61-2.15 bn) this year due to Hungary’s low, state-regulated utility prices, which are currently only a fraction of the sky-high energy prices of most European countries, energy expert Attila Holoda told RTL Klub News.

This way, Hungarian service providers have to buy gas and electricity at a much higher price than they sell it to the public.

In his first international press conference after the parliamentary elections, Prime Minister Viktor Orbán called on the EU to suspend the emissions trading system (ETS), the compulsory requirement to mix biofuels into fuel, and to withdraw the regulation that links the price of electricity to the price of gas.

As War between Russia and Ukraine Rages On, Orbán Govt's Low Utility Prices Seem Unsustainable
As War between Russia and Ukraine Rages On, Orbán Govt's Low Utility Prices Seem Unsustainable

Currently, a Hungarian resident pays EUR 0.17 for one cubic meter of gas, which on the stock exchange costs eleven times as much.Continue reading

The Prime Minister said that these are the requirements to ensure sustainable energy prices in Hungary.

In reaction to Orbán, his government’s former deputy state secretary of energy, Attila Holoda, told RTL Klub News that Orbán made sure to play it safe with the conditions, because they are things that “Brussels” will certainly not accept, as they would make it impossible to maintain the reduction of carbon dioxide emissions (to which EU countries are committed). Moreover, these measures would not significantly reduce energy prices, as other factors are primarily behind the drastic increase in prices,” he said.

The shortages due to the sudden economic upturn since the pandemic and the war between Russia and Ukraine, are the driving force of the rising prices, Holoda explained.

However, the main problem is that “the Hungarian forint and the Hungarian economy are weak,” the expert said, adding that “in the long term, the cuts in utility prices are  unsustainable.”

The expert said that the losses due to high purchase prices and low retail prices will definitely require some kind of price increase in the future, but he does not expect the government to do it in one step, so that families will not have to pay the market price straight away.

RTL also asked the GKI Economic Research Company about their estimate regarding the cost of the low utility prices. According to the calculations of the leftist economic think tank, the reduction of utility bills drained 300 billion forints from the budget last year, which could more than quadruple to 1,300 billion forints this year. This means that maintaining the reduction of utility bills could on average cost 320,000 forints (EUR 859) for a Hungarian family this year.

It was no secret that the immense cost of the utility price cuts would only further strain the Hungarian budget, which is already in need of serious correction. At the end of March, the general government deficit stood at HUF 2,309.4 billion, compared to HUF 1,144.1 billion at this time last year. Thus, more than two-thirds of this year’s full-year deficit target of HUF 3,152.6 billion was reached in only three months.

Hungary’s Budget Deficit Reaches Record High amid Russia-Ukraine War
Hungary’s Budget Deficit Reaches Record High amid Russia-Ukraine War

The February deficit is equivalent to nearly 3% of GDP and almost half of the deficit previously planned for the whole 2022 year.Continue reading

Featured photo illustration via Pixabay


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