Minister of Finance: Hungary’s high inflation rate is “temporary”

Hungary’s current high level of inflation is temporary and, as long as the central bank makes full use of the tools at its disposal, consumer prices could drop to around 3% next year, the finance minister said on Monday. Mihály Varga.

Hungary’s annual inflation rate is the highest in the entire European Union, according to a recent Eurostat fact sheet.

The central bank has already taken steps to reduce inflation, having been the first European central bank to raise the base rate, Varga said in an interview with private broadcaster atv’s website.

Varga insisted that lowering the VAT rate would not reduce prices in the long run as prices depend on market trends rather than government interventions, he said.

Since 2013, fiscal policy has been based on the principle that the resources needed for public spending such as health care, defense and education, are collected from consumption taxes rather than taxes on companies and income, he added.

Hungary’s tax policy aims to stimulate work, and that is why the VAT rate is higher than elsewhere in the European Union, he said. At the same time, Hungary has the lowest corporate tax and the third lowest personal income tax in Europe, he added.

“I agree with the central bank that higher inflation is dangerous,” he said.

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He added that the government supports job creation and investment, tax cuts and efforts to rebuild the economy. The resulting budget deficit will be higher, as in much of the rest of Europe, he said, adding that Hungary and Poland would be among the first countries to return to the 3% deficit level. , expected in 2024.

Commenting on the delay in approving Hungary’s 2.5 trillion forint (€ 7 billion) stimulus package, Varga said the obstacles were political. He insisted that the sovereign decisions of the government, while in line with the fundamental values ​​of the EU, were not to the liking of Brussels.

“We are locked in a dispute, but hope our responses to their comments are convincing,” he said. Varga said the country’s stimulus packages would be funded from Hungary’s budget pending approval from Brussels, even if the stalemate persists until 2022, he added.

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Varga said it would be too early to make a decision on the introduction of the euro during the 2022-2026 legislature.

The minister said he supported Hungary’s EU membership and would vote for membership if the issue went to a referendum this year. But, he added, Hungary is likely to be a net contributor to the EU budget within a decade, and in that case the matter would take another turn.

Featured photo illustration by Zsolt Czeglédi / MTI

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