“In 2018, the standard of living of Hungarian people and families increased parallel to the strengthening of the Hungarian economy”, the Ministry of Finance’s State Secretary for Budgetary Affairs Péter Benő Banai declared on Thursday in Parliament during the general debate on the discharge bill for 2018.

According to Mr. Banai, in 2018 the Hungarian economy expanded at a rate well above the European Union average, the stability of the state budget saw further improvement, the deficit developed favourably, and the sovereign debt to GDP ratio also fell at a greater rate than expected. “The 2018 budget can rightly be called the budget of people who make a living from work and families”, he said in summary.

“Last year, the gross average monthly wage of people in employment increased to 330 thousand forints, and the increase in the real value of pensions also continued. The State Secretary emphasised that the Hungarian economy grew by 5.1 percent instead of the forecast 4.3 percent in such a way that the greater rate of growth was not thanks to EU funding, adding that 2283 billion forints (EUR 6.94 billion) in EU funding was provided in 2018.

The State Secretary explained the fact that last year the deficit calculated according to EU methodology developed more favourably than the predetermined target of 2.4 percent of GDP to achieve 2.3 percent with disciplined fiscal policy, adding that the sovereign debt to GDP ratio also fell by a higher than expected rate from 72.9 percent at the end of 2017 to 70.2 percent, and that the structure of the sovereign debt had also improved tangibly.

Mr. Banai told the National Assembly that one of the main characteristics of recent years’ macroeconomic processes is that, in contrast to the period preceding 2010, growth is the result of strong foundations, not debt, and practically all sectors of the economy have contributed tangibly to increasing the rate of growth.

He reported on the fact that the construction industry had seen the highest level of growth, in which the government’s Home Creation Scheme had played a significant role. “The service sector and the performance of industry and agriculture also all posted higher levels of performance than in previous years”, he added.

According to the State Secretary, over 10,700 billion forints (EUR 32.5 billion) in investment was realised in Hungary, meaning the private and public sectors both contributed positively to the growth of the Hungarian economy.

He explained that the other stable pillar of growth was the 4.9 percent increase in household consumption, which was supported by increasing employment and higher wages, as well as by targeted tax cuts and tax allowances.

Mr. Banai reported on a host of economic figures from 2018, including the fact that the number of people in employment increased to some 4.5 million, while the rate of unemployment fell to 3.7 percent, and 47 thousand fewer people took part in the public work programme.

“Partly thanks to the wage increase and tax reduction agreement, the minimum wage and the minimum wage for skilled workers have increased by over 24.3 percent and 40 percent, respectively, compared to 2016”, he added.

From among the government’s family friendly measures, the State Secretary listed, amongst others, the increase in the tax allowance for families with two children, the cuts in VAT, the provision of free school textbooks, and the expansion of the Home Creation Scheme. He also spoke about the fact that there had been significant wage increases within the public sector, for instance within the fields of law enforcement, healthcare, the social sector and education.

The State Secretary recalled that in 2018 the government also placed particular emphasis on pensions: pension services increased by 3 percent, which is 0.3 percent more than the increase in the pensioners’ consumer price index. “This means the continuation of the increasing real value of pensions: between 2011 and 2018 the government has increased pensions by an average of almost 30 percent, and accordingly, thanks to permanently low inflation, the purchasing power of pensions has increased by some 10 percent”, he explained, pointing out that a pension premium was also paid last year, and pensioners also received an Erzsébet scheme voucher.

Mr. Banai told Parliament that improving the situation of enterprises, increasing their competitiveness, the continued whitening of the economy and improving the efficiency of tax collection had also been priority targets in 2018. “As a result, cuts in taxes and contributions left an additional 290 billion forints (EUR 881 million) in the pockets of families with children, the public and enterprises last year”, he added.

“Thanks to government measures aimed at further whitening the economy, the ratio of uncollected VAT in Hungary fell from 21 percent in 2013 to just 9 percent last year, according to preliminary estimates”, he said.

He also stated that in 2018 some 195 billion forints (EUR 593 million) in additional revenue was paid into the treasury from the four major tax types: corporation tax, personal income tax, general sales tax (VAT) and excise tax.

Mr. Banai explained that in 2018, the budget had provided significant funding of 112.4 billion forints (EUR 342 million) for handing the crisis situation caused by mass immigration, while a budget of 45.2 billion forints (EUR 137 million) had been available for improving the effectiveness of action against terrorism. “Thanks to the government’s forthright action, Hungary continues to be regarded as one of the safest countries on Earth”, he stated.

With relation to challenges for the upcoming period, the State Secretary said the results achieved by the Hungarian economy must be protected, and the current rate of growth of at least two percent over the European Union average must be maintained despite the slowing European and global economic environment.

(MTI)