Speaking at the general debate on the 2018 final accounts bill in the National Assembly, State Secretary for Public Finances Péter Benő Banai announced a slew of impressive indicators: economic growth well above the EU average, improving stability of public finances, a favorable deficit, and a debt-to-GDP ratio that decreased more than expected – 72.9 percent (2017) to 70.2 percent.
“The 2018 budget is rightly referred to as the budget of the working and the families,” Banai said. And the figures definitely back this.
Some noteworthy achievements include raising the tax allowance for families with two children, reducing VAT, providing free textbooks to students, expanding the home-building program, and increasing public sector wages for those in law enforcement, healthcare, social services, and education.
Hungary’s economy grew 5.1 percent versus the projected 4.3 percent. This higher growth, the Secretary of State emphasized, did not come from increased debt – as in the pre-2010 period – nor from an increase in the utilization of EU funds. Instead, growth has come from strong fundamentals. The contribution of EU funding was in fact lower in 2018, with funds received coming in at HUF 2.28 billion, just 2.3 percent of GDP versus the expected 2.4 percent.
Banai noted that all sectors have contributed to Hungary’s economic strength. Particularly strong sectors were construction (driven by the government’s home-construction program), the service sector, industry, and agriculture.
In 2018, more than HUF 10.7 billion worth of investments were made in the country, thus showing significant contributions by the private sector as well.
Household consumption grew 4.9 percent, boosted by increasing employment, rising incomes, and targeted tax cuts as well as other favorable tax policies. Unemployment dropped to 3.7 percent, with almost 50,000 fewer people participating in public employment programs.
Compared to 2016, the minimum wage rose by more than 24.3 percent, and the minimum wage for skilled workers increased 40 percent. Hungary’s average monthly gross salary rose to HUF 330,000 in 2018.
A priority last year was to help companies become more competitive, as well as increase the efficiency of tax collections and decrease tax evasion. Uncollected VAT saw a massive decrease from 21 percent in 2013 to 9 percent in 2018. The treasury received over HUF 195 billion more than expected for the four largest types of taxes (corporate, personal income, sales, and excise). The fruit of these efforts resulted in some HUF 290 billion in tax/contribution cuts for the general public, families with children, and businesses.
In 2018, pension benefits also rose by 3 percent. Between 2011 and 2018, the government increased pensions by an average of nearly 30 percent, increasing senior citizens’ purchasing power by around 10 percent due to low inflation. Pensioners received an extra bonus and other benefits last year as well.
Due to the expected global and European slowdown, State Secretary Banai said that the Hungarian government’s priority now was to solidify its achievements and maintain growth above the EU average of 2 percent, no matter the economic environment.