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Veronika Gulyas

Hungary Targets 1% Economic Growth in 2023, Minister Says

Pedestrians on Vaci Street in Budapest, Hungary on Thursday, Aug. 26, 2021. Hungary’s economy shot higher by a record amount in the second quarter as the economy rebounded from its worst-ever three-month contraction during the height of the pandemic. (Bloomberg)

Hungary’s government hopes to achieve 1% economic growth in 2023 after taking steps to help investments and extending an interest rate cap for small and medium enterprises, its economic development minister said. 

Like many other European Union countries, Hungary is attempting to shield citizens and companies from runaway prices amid an energy crisis and the ongoing Russian invasion of Ukraine, which is about to enter its ninth month. 

To avoid further acceleration of inflation, the government will keep price caps on vehicle fuel and food staples in place for as long as necessary, Economy Development Minister Marton Nagy says in a government briefing on Saturday.

Hungary’s inflation rate in September was 20.1%, the highest reaching since 1996, boosted chiefly by rising prices for foods, including staples like bread and cheese, and fuels. 

To cut costs for small and medium businesses, Hungary will set an interest rate cap on their loans to 7.8% between Nov. 15 and July 1, Nagy said. The rate currently stands at 16.7%.

The burden on Hungary’s banks at 80 billion forints ($192 million) over the period, which is “tolerable” for the system, he said.

Prime Minister Viktor Orban’s cabinet will also discuss a tweak to a windfall tax on banks to boost lending, Nagy said, in a move aimed at fostering growth even in a high inflation and elevated interest rate environment.

Hungary’s central bank raised the effective policy rate to 18% on Oct. 14 to rein in weakening in the country’s currency against the euro. The forint has eased 10% so far this year, making it the third worst performing emerging market currency.

©2022 Bloomberg L.P.

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