Last weekend brought much anticipated news: Moody’s, following the two other major credit rating agencies, Fitch Ratings and Standard and Poor’s, finally upgraded Hungary’s national sovereign debt to the “recommended for investment” category.
This last upgrade recognizes the post-crisis recovery of the economy, but it also eases the cost of financing Hungary’s expenditures by some 10 billion HUF in the central budget in the next twelve to eighteen months, making Hungary’s fiscal balance even more sustainable. That, in turn, helps attract investment.
On Wednesday morning, Minister of National Economy Mihály Varga had other good news to report: The state budget accumulated a surplus of 57.3 billion HUF in October 2016, an unprecedented figure in the past fifteen years. The record-breaking surplus will largely be allocated to structural development projects and was a result of changes in the expenditure structure, lower spending, favorable economic trends and higher tax revenues due to improved transparency.
The surplus allows us to reduce the country’s deficit goal for 2016 to 1.7 percent. Since 2011, the government has kept the state deficit under 3 percent.
Strict finances and a growing economy allow the government to propose significant payroll tax cuts without giving up fiscal stability. The government’s economic policy priorities are increasing wages, retaining labor and improving efficiency. These together contribute to the nation’s “workfare instead of welfare” approach, which was put in place after 2010 to counter vicious employment trends and has achieved remarkable success: the unemployment rate has been reduced from the highest in the country’ history, 11.8 percent, to the lowest ever recorded in Hungary, 4.9 percent.
As reported recently by the Ministry of Human Capacities, studies show that the poverty trend turned around in 2012. Since that year, some 600 thousand people have managed to break out of poverty. The Orbán Government’s social strategy also launched special schooling programs, provided free meals and textbooks for disadvantaged children and countered social exclusion in Roma communities, among others. These programs, and the growth itself, have all happened while keeping the budget under control.
Looking back to where we were in 2010, Hungary has come a very long way economically. The growth and the broader economic stability have made a huge contribution to addressing social challenges that have been with us for decades. Hungary is growing stronger. The upgrade of the country’s credit rating is just another sign that the Hungarian reforms are working.