Sunday’s legislative elections in Hungary have concluded, giving rise to Viktor Orbán’s fourth consecutive term. The new political leadership will face many challenges, including the war in Hungary’s backyard. The Russian-Ukrainian conflict could also present serious energy supply problems. The government-imposed ceiling on food and gasoline prices last year, the spending spree before the election, and Orbán’s low-cost energy policy are not sustainable in the long term. Furthermore, prices in Hungary are spiraling out of control and food shortages and other unexpected situations may arise in the near future.
These challenges require completely different direction and much tougher economic policies from the next Orbán administration.
On election day, Orbán has already been asked about possible economic austerity measures and whether official energy prices, which are kept well below market level, will remain in place. The prime minister quickly dodged the question, saying he ‘wanted to win today’s election first’ and only then ‘to tackle these issues as well’.
Despite his evasive response, economists and several government politicians warned that Hungary’s economy faces serious problems.
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Government commissioner: crisis management governance must be launched
Instead of “seven years of plenty”, we will now have much narrower economic room for manoeuvre, according to István Stumpf. Orbán’s former minister and current government commissioner told the news site Index that the government will have to take note that the environment has changed, which Viktor Orbán probably expects as well. Many questions now need to be raised again, Stumpf said.
Unlike before, governance of crisis management must clearly be launched.
“We are in the middle of a war, which is going to have a huge impact on energy supply, prices have gone up incredibly, there are going to be food shortages, so the government is going to have to deal with unexpected things that it has ever experienced in the last twelve years. In that sense, having a strong governing party and having two-thirds in parliament to act quickly can be an advantage,” Stumpf said.
Former central bank governor: fundamental changes are needed in the central budget
Despite another landslide two-thirds victory, the fifth Orbán government cannot continue where it left off, writes Péter Ákos Bod in his latest article published in Wallethe wrote before the election results.
According to former National Bank governor and former Conservative government minister Antall, fundamental changes are needed in the budget as inflation will pick up further after the price cap is lifted. The new government will have to solve these problems without knowing how long the war will last and what effects it will have.
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Bod also points to the negative effects of the “other blow”, the Covid pandemic, which has been ignored but will be felt long into the future.
The economist says education and health will certainly need fiscal support and that the refinancing of excessive public debt will be a major burden on public finances this year and next.
“The bills of past neglect are now presented by reality,” the economist professor warned, adding that the government must also stabilize the economy in a country where people have benefited from an unprecedented abundance of money and no were informed only of “Hungary’s excellent economic situation”. growth.”
In light of the former NBH governor’s warning, it is not surprising that a few weeks ago Mihály Varga already spoke about the need for a fiscal readjustment after the elections.
The finance minister said RTL that before the war they expected economic growth well over 5% this year, but that because of the conflict they have to rewrite their plans. For that, they would wait until after the elections. But after that, the first and most important step will be to adapt Hungarian public finances to the economic difficulties and the damage caused by the war, Varga said.
Csaba Dömötör, State Secretary in the Prime Minister’s Office, however, predicted a much more modest change in direction.
“If Fidesz wins, don’t expect drastic changes in steering wheel direction,” Dömötör said. Telex during the Fidesz demonstration awaiting the results of Sunday’s elections.
Featured photo by Benko Vivien Cher/Prime Minister’s Press Service/MTI