Hungary Leaves ‘Red Line’ Far Behind as Virus Shreds Budget Plan
Hungary Leaves ‘Red Line’ Far Behind as Virus Shreds Budget Plan
(Bloomberg) -- Hungarian Prime Minister Viktor Orban, who resisted the trend of European Union governments unleashing spending to fight the economic fallout of Covid-19, finally caved to calls to relax his budget stance.
The government raised its 2020 budget-deficit projection Monday to between 7% and 9% of gross domestic product, compared with a previous 3.8% forecast.
The new goal “isn’t unique,” the Finance Ministry said in a statement, citing an average target of 9% of GDP for EU members.
As recently as April, when Hungary’s economy came to a standstill under a coronavirus lockdown, Orban set a 3% shortfall as a “red line.” Over the past decade, he’s credited budget discipline for shielding Hungary from potential penalties from the EU as it clashes with the bloc over accusations he has eroded the rule of law.
The new target follows evidence that the economic damage from the virus is worse than expected. The economy contracted a record 13.6% in the second quarter -- the worst plunge in the EU’s eastern wing -- with the budget deficit nearing the full-year target in just the first half of the year.
The recession, as well as stimulus in the form of tax breaks, are expected to reduce budget revenue by 1.4 trillion forint ($4.7 billion) this year, according to the Finance Ministry.
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