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Mihály Varga announced that the Ministry is working on a financial scenario for the years 2020-2023. It shows how the government plans to return to the fiscal trajectory of previous years. The proposal aims at economic growth, with a focus on reducing debt and controlling the deficit. According to the minister, it is already clear that the virus is causing a slow reorganization.
This year, there could be a 6.4 percent drop in GDP, according to ministry calculations.
In a crisis caused by a pandemic The turning point is set for the second quarter of 2021, at which time the issue of the vaccine will be decided, and after that, the economy can recover faster, said the minister. He added that the setback that had occurred thus far could be handled well.
The Minister announced that defense had been financed from the epidemic protection fund, that the fund had been created with 426 billion HUF, of which 747 billion HUF had been paid in recent months. Originally, 942 billion HUF was transferred to the economic protection fund, and the amount used so far is 2,059 million HUF.
The deficit of public administrations will be significantly higher this year, based on PM calculations, it could be between 8 and 9 percent of GDP – He said.
Mihály Varga answered affirmatively to the question of whether there is an agreement between the PM and the MNB on crisis management. As well as the second wave of the epidemic. He noted that it is presumed that if there is no vaccine, there could be another wave. He said the EU was providing credit for a job retention program, with a loan of around € 504 million to finance the job retention program.
There is a specific opportunity for VAT cuts, and the government continues to defend the principle of reducing income taxes. When asked if it is planned to modify the Central Bank Law on the payment of MNB profits, he said that the Board of Directors of the central bank will decide on this with interest.
The reorganization program through 2023 suggests that the government plans to return to a 1-3% budget deficit by then. This is not surprising given this year’s declining deficit and the deteriorating economic outlook. An example of the latter is the new GDP forecast from the Ministry of Finance: the 6.4% recession is worse than the previous forecast of around 5%. Until now, the PM has projected a deficit band of 7-9% depending on the size of the stimulus programs, now changing it to 8-9%, but it is not yet clear to what extent the deteriorating macroeconomic trajectory and public spending they will play a role in this.
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