Hungary to raise 2021 budget deficit target

BUDAPEST: Hungary's government will modify the 2021 budget to raise the deficit target to 7.5% of economic output from 6.5% as the third wave of the pandemic has hit the economy hard, Finance Minister Mihaly Varga told daily newspaper Vilaggazdasag.

In an interview published on Wednesday, Varga said the Hungarian economy, which contracted by 5% in 2020, could still rebound "surprisingly fast" this year and grow by 4.3% according to current projections.

"Looking at next year, we expect that a high rate of vaccinations will allow a reopening (of the economy) and we could see GDP growth possibly exceeding 5%," Varga said.

"So from the second half of this year, growth will be surprisingly fast."

Hungary's coronavirus infections are on the rise and its hospitals are under extraordinary pressure as the country has become a hotspot in the third wave of a pandemic that has hit Central Europe especially hard.

This poses a tough challenge to nationalist Prime Minister Viktor Orban ahead of elections in early 2022.

Orban is balancing the world's highest daily per-capita coronavirus death rate, according to Our World in Data, with a need to reopen the economy as fast as possible. The government has flagged reopening schools from April 19.

Varga said the finance ministry was still planning next year's budget and so he could not give a projection for the 2022 deficit target.

But he said there would be "significant new expenditures" and doctors' wages will rise further, while young people below the age of 25 will get total exemption from personal income tax.

"A decline in the deficit could send a message that we are returning to normality, so we don't let the debt level rise and we target a stable growth path," he said.

The minister added that Hungary would not need to tap international markets with a foreign currency bond issuance until early 2023.