Hungary’s economy in 2020: A year of effective crisis management

“For us, all lives and all jobs matter” – This has been the motto of Hungary’s response to the coronavirus pandemic all along, and, by the end of 2020, we can say with 100 percent certainty that the government managed to effectively remedy the economic downturn, protect jobs, support Hungarian businesses and help families get by in these difficult times.

If it hadn’t been for the onset of the European COVID-19 pandemic in late February, we would have had every right to expect another bullish year of 4-5 percent annual economic growth in Hungary. What’s more, in 2019, Hungary registered a hefty 24 percent growth in FDI compared to the previous year, real wages were on the rise again and the country reached almost full employment.

But the coronavirus crisis did hit the continent and crushed our hopes of record-breaking economic figures and a historic low in unemployment.

Growth became the mantra of the past, while perseverance, damage control and job protection quickly took its place.

In mid-March, a few days after the state of emergency went into effect, Prime Minister Orbán became one of the first leaders in Europe to recognize that “[the epidemic] does not only put people’s health at risk, although that’s the most important, but it also threatens the economy.” He quickly announced an array of new economic measures with the promise that this government would “create as many jobs as the epidemic destroys.” It was primarily thanks to the oft-criticized Coronavirus Protection Act that the Hungarian Government was among a handful of European countries that took effective measures promptly.

While most signs suggest that we are beyond the worst part of the crisis and some key economic figures, such as the unemployment rate, were back at their pre-COVID levels by mid-August or early-September, some sensitive industries, including tourism, catering and hotels, that employ a vast number of Hungarians continue to be driven out of business.

Two weeks ago, PM Orbán took to his Facebook page and announced four new measures to be included in the government’s existing economy protection action plan aimed at reducing the coronavirus pandemic’s impact on Hungarian families and businesses. (Read more here and here about the action plan put in place to remedy the consequences of the first wave of the virus.) The new steps include:

The moratorium on loan repayments for families and businesses will be extended until July 1, 2021.

The government will reimburse two-thirds of the salary payments of businesses in the catering, tourism and hotel sectors that had to temporarily close due to the protective measures. This will also apply to private transportation firms.

The local business taxes of small- and medium-sized enterprises will be halved from January 1, 2021. Based on talks with the representatives of smaller settlements, towns and villages with a population below 25,000 will receive additional government support.

Families with (or expecting) children may now apply for a preferential home renovation loan of up to HUF 6 million, out of which up to 3 million will be automatically deducted once the renovations are over. The interest rate of the loan may also not exceed 3 percent.

Although 2020 is not going to make it into history books as the best year for the global economy, large investments continued to generously flow into Hungary even after the COVID-19 outbreak. Due to a successful foreign trade policy, spearheaded by Foreign Minister Péter Szijjártó, Hungary has maintained its position as one of the most attractive investment destinations in Europe, pulling in large-scale investments from both the East and the West and providing massive support for domestic firms.

Albeit slightly bruised by the pandemic, the Hungarian economy didn’t lose its momentum. By protecting jobs, supporting Hungarian businesses and helping families, our country will once again prove that if there’s work, there’s everything.

In Prime Minister Orbán’s own words: “A workfare economy pulled us out of trouble in 2010, and it is going to pull us out of trouble once again.”