Addressing an online conference, Finance Minister Mihály Varga said that his ministry’s forecast for a 5-6% contraction this year months ago is approved by a growing number of institutions and analysts. 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% 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% 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.