Facts & Statistics

GDP may already exceed the pre-crisis level of summer

The performance of the Hungarian economy may already exceed the pre-coronavirus crisis level in the summer months.

Minister of Finance Mihály Varga emphasized at a local economic conference that the turnover of hospitality has significantly improved based on the data of online cash registers, and the sector’s performance is finally back to its level from before the epidemic.

The minister pointed out that the economic momentum will be helped by employment, wage growth, the start-up of newly built corporate capacities and EU transfers in the next period. However, the momentum is being held back by weak foreign tourism, more subdued demand in the EU and the lifting of the moratorium on loan repayments, he added.

Among the positive signs, he said that the labor market has started to rise, and unemployment may be well below 4 percent soon. The number of employees still exceeds 4.5 million.

He also called the performance of the industry favorable, with most manufacturing sub-sectors making a positive contribution to the sector’s performance growth in the first quarter. In terms of investments, Hungary is well above the EU average.

He said of the loan moratorium that the government is in favor of a cautious exit, in cooperation with the central bank and the banking association. The government would like to lift the moratorium in the best way possible for the 45-50,000 businesses and 1 million individuals affected.

The minister called the increase of inflation temporary and thinks it will be around 3 percent. He also added that Hungary’s economic protection package accounted for 30 percent of GDP, with more than HUF 4 trillion spent on investments.

He noted that the deficit level has already been reduced this year compared to last year, and it will be reduced next year as well. By 2024, the Hungarian deficit will return to the 3 percent Maastricht criterion. Fiscal policy remains aimed at supporting the economy to remain on a path of sustainable growth.

An important element of future competitiveness is whether the current tax system can remain, referring to the idea of ​​a global minimum tax. He added that an agreement is expected at the Organization for Economic Co-operation and Development (OECD) meeting at the end of June.

He noted that Hungary’s corporate tax level is the most favorable in the EU. The Hungarian government considers it a mistake to exclude tax competition from global economic competition.

According to Mihály Varga, there may be 2-3,000  companies in the Hungarian economy that could be affected by the introduction of the global minimum tax. The government will do its utmost to maintain the favorable environment that has helped fuel strong economic growth in recent years.

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