According to the latest data released by the Hungarian National Bank (MNB), Hungary ‘improved the ratio of general government gross debt to GDP more than expected, from 76.8 per cent to 72.9 per cent last year.’ MTI quoted Minister of Finance Mihály Varga as commenting in a statement: ‘Despite not receiving the recovery funds it is entitled to, Hungary is still able to achieve above-average economic growth in the EU and reduce its public debt.’
Despite Hardships, the Economy Performs Well
In his annual state of the nation address on Saturday, Prime Minister Viktor Orbán stated that no assistance, only new sanctions are coming from Brussels. According to the PM, the EU has withheld the funds the country is entitled in bad faith. Orbán also promised to reduce inflation to a single-digit value by the end of the year in spite of the challenges the government is facing.
Returning to Mihály Varga’s Facebook post, he said: ‘We continue to improve our stability indicators even in dangerous times, while further decreasing public debt and lowering the budget deficit.’ The finance minister suggested that the Hungarian economy would avoid recession and grow above the EU average this year.
Based on the preliminary data of financial accounts, MNB announced that the gross, consolidated, nominal debt of the government sector was 47.296 billion forints, amounting to 70.6 per cent of GDP at the end of last year. With the debt of Eximbank taken into account, the sector’s debt stands at 48.840 billion forints, or 72.9 per cent of GDP. During the coronavirus pandemic, both government debt and the budget deficit increased significantly, although neither is surprising or exceptional. It was typical throughout the European Union to finance the recovery from the coronavirus crisis with loans.
Climbing a Steep Hill
In recent years, the Hungarian economy has been showing signs of improvement and growth. One of the main contributing factors has been the government’s focus on fiscal discipline and reducing public debt. The country has managed to reduce its public debt-to-GDP ratio, which, in turn, has improved its creditworthiness.
Another important factor in Hungary’s economic growth has been its focus on innovation and entrepreneurship.
The government has been actively supporting startups and SMEs by providing funding, tax incentives, and other forms of support. This has led to an increase in the number of new businesses and new jobs created. The country’s strong economic performance has also been supported by its favourable location within Europe. Hungary has become an important hub for logistics and manufacturing, with many multinational corporations setting up operations within the country.
Furthermore, Hungary’s membership in the European Union has contributed to its economic growth as well. The country has benefited from access to the EU’s single market. It has also received significant funding from EU programmes, such as the Structural Funds and the Cohesion Fund, which have helped infrastructure development, education, and innovation. Despite the challenges posed by the COVID-19 pandemic, Hungary remained resilient and managed to maintain its momentum in economic growth. The government implemented measures to support businesses to help them keep their employees at the height of the pandemic, and introduced a comprehensive vaccination programme to help contain the spread of the virus.
Even though the war and sanctions took their toll on the economy, as they did in every other European country, Hungarian national finances are steadily stabilising, proving wrong those who were doubtful before.