This year’s pandemic will significantly increase public debt as a share of GDP in most countries, as GDP declines on the one hand and spending increases on the other due to economic protection measures. Domestic debt is also rising sharply, but the value in many European countries is much higher than others, daily Magyar Nemzet writes .
The Ministry of Finance and the Public Debt Management Center, as well as the Hungarian National Bank (MNB), have recently reported on the economic developments this year and the expected development in the coming years. Based on these, it appears that the extremely favorable public debt-to-GDP ratio of around 65 percent reached last year will rise to close to 80 percent this year. This is very disappointing, as debt reduction started from roughly this level, but the fact that a significant reduction already took place left more room to maneuver in the unexpected pandemic situation.
Many EU countries had higher debt levels, so this year’s burdens will affect their situation more severely.
Before the crisis, at the end of last year, within the European Union, which then still included Great Britain, the public debt-to-GDP ratio of 10 countries exceeded the Hungarian level, and that of several countries was close to Hungary’s. The most indebted state was Greece, at 176 percent of GDP due to previous crises; it should be added that if the conditions of previous rescue programs are met in the longer term, some of the country’s debt is likely to be released over time. This year, the Greek level will rise to 192 percent, which means that the impact of the crisis is very serious in their case as well.
In second place is Italy, where the ratio is expected to go from 135 to 157 percent. This is quite dramatic, as last year’s level was also difficult to manage; funding will now be difficult without the European Central Bank’s (ECB) assets purchase program. The rate is still over 100 percent in Portugal, where the level is rising from 117 to 132 percent; the role of the ECB is also crucial here, with the country’s 10-year government bonds now trading at negative yields.
The debt level in Cyprus will hit 105 percent, up from 95; in Spain, we will see a rise from 95 to 115; in the UK, from 80 to 100; in Belgium, from 99 to 114; and in France, from 98 to 116. The Austrian level is already comparable to the Hungarian one, rising from 70 to 79 percent. Meanwhile, Ireland, Slovenia and Germany are still slightly lower than Hungary’s ratio.
In the other member states, however, the level will remain below the 60 percent Maastricht criterion at the end of this year, in some cases two to three percentage points higher. Estonia is in the best position in the EU, with a debt-to-GDP ratio of only 8 percent, not expected to rise above 10 percent even as a result of the pandemic.
The Hungarian debt ratio is thus in the middle of the European Union. Although it now substantially exceeds the Maastricht level, it cannot be said to be high in European terms. From this level, if the recovery starts and the government once again focuses on debt reduction, it will be possible to return to pre-pandemic levels in just a few years.
Title image: Hungarian Central Bank Governor György Matolcsy. (MTI/Szilárd Koszticsák)
