Hungary: Government announces relief measures to mitigate economic fallout from Covid-19 pandemic
Over the course of March, the Hungarian government announced a series of policy measures to alleviate the economic fallout from the Covid-19 outbreak worth an estimated HUF 208.6 billion, while it reallocated approximately HUF 25 billion of government spending to the healthcare sector. Moreover, Parliament controversially granted Prime Minister Viktor Orban the right to rule by decree—with no set time limit—to combat the virus outbreak; the government revised the 2020 budget deficit target from 1.0% to 2.9% of GDP to grant the necessary financial firepower; and the prime minister announced the introduction of a pandemic fund as of 4 April mainly targeting healthcare workers. Details of a new stimulus package will be unveiled on 7 April.
The large chunk of the measures implemented thus far have been aimed at alleviating the fiscal burden for business. This includes cancelling employers’ social contributions in the most affected sectors; lowering health care contributions; exempting around 80,000 SMEs of the small business tax; temporarily cancelling the tourism development fee until May; a tax relief for media service providers for incurred losses of advertising income; and the suspending interests and charges on certain unpaid taxes.
Looking ahead, although the policy response should provide some relief, the impact of Covid-19 will deliver a heavy blow to the Hungarian economy. Lockdowns, travel restrictions and the closures of borders is set to take a toll on the tourism and hospitality sector. Meanwhile, muted external demand for both manufactured goods as well as commodities and disrupted value chains should weigh severely on activity, especially in the all-important automotive sector.