Hungary’s 14-point plan to crack down on inflation is coming to fruition

With the war in Ukraine and the EU’s misguided sanctions policy driving prices to record highs in Hungary, the government has been drafting plans to tackle inflation. The original goal was to reach single-digit inflation by the end of 2023, but this may come about sooner.

With the aforementioned plan coming to fruition, government projections suggest that the measures taken will not only achieve their goal but will do so by October 2023.

Let’s take a closer look at the 14-point plan Hungary implemented:

1. Curbing inflation: The government aims to crack down on inflation, partly through the 15% mandatory discounts on food items and strict online price monitoring to diminish price gauging. Already, due to these measures, inflation has decreased by 8 percentage points from the beginning of the year, contributing to economic growth. This effort is expected to reduce inflation to single digits by October.

2. Increasing real wages: Starting in August, the swift and efficient crackdown on inflation will accommodate an increase in real wages, boosting families' purchasing power and overall consumption.

3. Utility cost reduction: The government commits to maintaining reduced utility prices for households, providing support up to the level of average consumption, which translates to around HUF 181,000 per month for each Hungarian family.

4. Interest rate cap for mortgages: The government decided to maintain the interest rate cap for household mortgage loans until the end of the year. The scheme has already protected some 350,000 families and is currently providing security for 300,000 families. In total, the corporate and retail interest rate freeze measures have already supported families and the SME sector to the tune of nearly HUF 330 billion. offering stability and protection for families against high-interest rates.

5. SZÉP card limit increase: To enhance family purchasing power and stimulate demand, the government has raised the limit of the SZÉP card by HUF 200,000, reaching a total limit of HUF 650,000 starting from August and including the ability to use the card for groceries.

6. Full employment commitment: The government is committed to maintaining full employment, with the number of employed workers approaching 4.8 million, alongside new guest worker regulations supporting sectors with labor shortages.

7. Industrial revitalization and capital programs: The Gábor Baross Industrial Revitalization Credit Program with a budget of HUF 1 trillion and the Gábor Baross Capital Program with a budget of HUF 600 billion provide substantial resources to companies, with a significant portion of funds already contracted.

8. Continuation of the Széchenyi card program: The government's support for SMEs continues through the Széchenyi card program, resulting in nearly HUF 600 billion of contracted, interest-subsidized loans this year alone.

9. Interest rate cap for SMEs: The interest rate cap for SMEs will be maintained until the end of the year, currently protecting over 28,000 SMEs from high interest rates.

10. Support for energy-intensive SMEs: The government provides support for energy-intensive SMEs to finance their increased utility costs and energy efficiency investments.

11. Removal from fixed-rate energy contracts: SMEs were released from fixed-rate electricity and gas contracts in January, leading to a more than 50% reduction in energy bills for tens of thousands of clients by April 2023.

12. Electricity price ceiling for key sectors: In certain key sectors, the government introduced an electricity price ceiling of 200 euros/megawatt, freeing 5,000 businesses from high-priced fixed contracts.

13. Factory Rescue Program: The government implemented the Factory Rescue Program, allowing 140 major companies to undertake HUF 300 billion in energy efficiency and renewable energy investments, supported by targeted assistance of HUF 120 billion.

14. Encouragement of investments: The government actively encourages investments through individual government decisions, resulting in 35 projects in 2023 worth over HUF 350 billion, with a mere HUF 70 billion in financial assistance by the government.

As you can see, the Hungarian government is working hard to mitigate the damage done by the war and the EU’s economic meddling. By protecting families and businesses alike, sanction inflation will no longer affect the people of Hungary. Solid support for investments and local enterprises will put the Hungarian economy on an upward trajectory so we can recuperate and grow from the year 2024.