Category: Economy

In a bid to expand Hungary’s family-friendly tax system, the Hungarian government is planning to double the family tax allowance, extend tax exemptions for young and multi-child families, and prolong the reduced VAT on housing, the Ministry of Finance announced on Wednesday.

As reported by Magyar Nemzet, the ministry outlined that next year’s tax amendments, expected to be submitted to parliament soon, will focus on expanding benefits for families, streamlining tax administration, and measures to further counteract the shadow economy.

The proposed family tax allowance increase will take place in two stages if supported by the national consultation, the government said. Starting on July 1, 2025, families with one child will see a monthly tax allowance of HUF 15,000, while two-child families will receive HUF 30,000, and families with three or more children will receive HUF 49,500 per child. A further increase, effective Jan. 1, 2026, would raise these amounts to HUF 20,000, HUF 40,000, and HUF 66,000, respectively.

In addition to these family tax adjustments, the government plans to extend the current reduced VAT rate of 5 percent on new residential properties by two years until Dec. 31, 2026, offering further relief to families and support to construction businesses. Under certain conditions, the discounted rate could be extended until 2030.

The government has also proposed allowing pension fund savings to be used for housing loan repayments, renovations, and home upgrades from next year. In addition, Hungarians could potentially use up to 50 percent of their Szép card balance — a popular benefit card provided by employers to employees — for housing-related expenses.

Additional measures include tax relief for users of agricultural diesel fuel. This will allow farmers to reclaim excise taxes on diesel used for agricultural activities, including on green fields and fallow land.

The government also confirmed that special taxes on pharmaceutical manufacturers and telecommunications will be lifted by the end of the year.

The ministry’s announcement emphasized Hungary’s focus on lowering taxes, supporting families, and simplifying tax structures.

Over the past decade, Hungary has reduced labor taxes more significantly than any other EU nation, a move, the ministry claims, has helped to create a highly competitive tax system and encouraged record foreign investment in the country.

Hungary’s new economic policy must be neutral and free of politics, particularly when it comes to trade with the East and the West, Hungarian Prime Minister Viktor Orbán said over the weekend at a countryside conservative meeting that serves as the traditional opening of the autumn political season.

“The new economic policy must be neutral. This means that we must resist any kind of intervention, we must stay out of the conflicts that force us to choose,” Viktor Orbán said in his speech at the picnic in the village of Kötcse, an excerpt of which he shared in his new video.

The prime minister said that deeper economic relations should be maintained with everyone for as long as possible. He also indicated that the economy should not be viewed through a political lens, but solely through the viability of the Hungarian economy. As he said, the first content of economic neutrality is financial neutrality.

“It is not possible to supply Hungary’s credit needs exclusively from a single financial market. This means that Brussels and London are not enough for us, we need Qatar, Beijing, Tokyo and our own voters to buy Hungarian government bonds,” he said.

According to Orbán, the second element of neutrality is investment neutrality. He indicated that investments are needed from both the West and the East. He mentioned market neutrality as the third element.

“It is worth exactly the same to us if China buys our products for the same price. This is not an ideological or political issue,” he said.

He also mentioned that when the Ukrainians stop the gas transport from Russia to our country, Hungary will be able to get the gas through the Turkish Stream, which was built in the meantime.

“These things do not happen by chance, there is an order to them,” he said.

Prime Minister Viktor Orbán is proposing a “peace budget” for next year, which would also require a cabinet reshuffle, he said in a social media post on Sunday.

Sharing a part of his keynote speech at Kötcse, where conservatives meet in the Hungarian countryside to mark the traditional opening of the autumn political season in Hungary, Orbán said:

“We have the action plan. It hasn’t been presented (yet), it’s not announced, it’s not yet under political work, but we refer to it as the peace budget, which is already in the desk drawer,” he said.

“At the heart of this peace budget or action plan is putting economic growth in the 3-5 percent range by 2025. We need to do a budget that can deliver 3-5 percent growth while maintaining fiscal balance, which is necessary because of the credit rating agencies and the financial global crisis. That is the basis of everything, and I think we can do that,” he continued.

Orbán also mentioned Central Bank Governor György Matolcsy, who last week sharply criticized the government’s economic policy, blaming them for the spike in inflation last year, which he said was a result of the government hitting the acceleration while the central bank was “slamming on the brakes.”

In his post, Orbán foreshadowed higher wages, increased family tax rebates and a cabinet reshuffle required for the change in economic policy.

“We need an Erhard, who was formerly György Matolcsy until he left to become the central bank governor. This person needs to be the top economic minister, who is in charge of both economic and fiscal instruments and who can lead this action program,” he said.

By Erhard, Orbán was referring to former CDU politician Ludwig Erhard, who was the economics minister of Konrad Adenauer from 1963 to 1966 and is largely credited for the post-war economic upswing of West Germany.

Airbnb is increasingly seen as a scourge to cities around the world, providing tourists with cheap accommodations but reshaping neighborhoods, taking rentals off the market, and driving up the cost of living. However, in Hungary’s Budapest, a city notorious for its huge tourist market, the move to rein in Airbnb has apartment owners fighting back.

Balázs Schumicky, president of the Hungarian Association of Apartment Owners, said while speaking with InfoRadio that the ban on Airbnb accommodations will not solve the problems of the VI district, and these vacation rentals contribute a large amount of money to the growth of the district.

As Remix News reported earlier, the 6th district council announced in early August that it would hold a binding referendum in September on a ban on the renting of Airbnb-type accommodation. In other words, from Jan. 1, 2026, no apartments should be rented out to tourists on a short-term basis. The vote will be based on a mandate given by the Hungarian parliament in 2020, which gave municipalities the power to set the number of days a year during which accommodations can be rented out.

“But what the locals cannot decide, and the municipality does not communicate, is that hostels in apartment buildings will continue to welcome tourists regardless of the outcome of the decision,” the president of the Association of Hungarian Apartment Owners told InfoRadio.

Balázs Schumicky believes that the ban on Airbnb apartments would cause more problems than it would solve. On the one hand, the VI district would lose, according to their calculations, about HUF 1 billion (€2.54 million) in tax revenue, while, on the other hand, hostels will continue to attract “demanding, cheap party tourists” who do not respect the rules of communal living, and with the disappearance of private accommodation, this is likely to increase.

The municipality envisages that some of the disappearing Airbnb homes would also be taken over by sublets. According to the expert, the disappearance of private accommodation would not be good for condominiums either, as they could see the emergence of bad tenants or the loss of apartment renters who have a vested interest in contributing to the building’s extraordinary costs — such as a costly elevator repair — as their guests value the accommodation based on the condition of the building.

The association leader additionally reiterated that the district would sorely miss tax revenue from the end of short-term rentals.

“If we compare this with the HUF 260 million for road renovations or HUF 860 million for the running and maintenance of kindergartens, this HUF 1 billion is a very significant amount,” he said.

Below are comments compiled from an interview with Tamas Leder, country general manager for fintech company Revolut in Hungary, which appeared on the Hungarian business news portal Portfolio.

Some 5 percent of Hungary’s population of 10 million are Revolut customers, a share that is only higher (within the EU) in Ireland and Romania.

When Leder joined Revolut in 2021, the company had 400,000 customers in Hungary. This figure has since quadrupled, and he hopes to hit 2 million customers in Hungary next year.

This year, Revolut has launched various products aimed at helping people save money, including a flexible money market fund and a regular savings account. However, the primary driver of activity is still payment traffic. Customers are particularly drawn to there being no transaction fee with Revolut, as the company instead takes this on as a net cost.

However, Portfolio notes that an additional fee will apply to currency exchanges starting Oct. 1. Leder says not all details are yet clear regarding the rule change but is fairly certain the tax will not be passed on to customers in the beginning. As to the longer term, he cannot say.

In terms of currency exchange costs, due to market competition, most banks are now offering market rates, eliminating what used to be a large spread. Leder says this is great news for all customers and great that no external, regulatory intervention was needed.

The biggest news for Hungarians is Revolut’s plans to open a bank branch in Hungary. What does this mean for an e-bank? In 2022, Leder says the company shifted from being an e-money service provider to a banking service provider, in line with its strategic goal of becoming a universal bank.

Revolut already has branches in France, Ireland, the Netherlands, and Spain, with a pilot launched in Germany.

Hungary is also one of the core markets targeted for a local branch, Leder says, explaining that this is different than a subsidiary bank.

Customers are currently protected by the Lithuanian deposit insurance system, he says. The Hungarian and Lithuanian deposit insurance systems are both EU, there are no major differences. Revolut has also been under the supervision of the European Central Bank since 2024, Leder stresses.

Under a local branch, local teams will be able to create local products tailored to local needs instead of global products. Customers will also be able to have a local bank account number and IBAN through the branch, meaning they can then use Revolut as their primary bank.

Leder explains the importance of this, as presently many Hungarian customers request their salaries be sent to their Revolut account. However, this is now difficult, as the transfer first goes to a Lithuanian bank account and has a turnaround time of up to a couple of days. There may also be costs that the employer either accepts or does not.

A Hungarian account number solves this problem in one fell swoop, Leder says.

Many customers also have their salary sent to their traditional bank account, but then immediately transfer it to their Revolut account. Some people only transfer as much as they want to spend in the month, while others transfer their entire salary, maintaining some for savings as well.

As to providing services in Hungarian, Leder says that is also in the works, noting that the company has plans to provide customer service in the local language in all our countries. However, thus far, Revolut customers know services are in English and typically do not have a problem with this.

Revolut reported a 95 percent increase in revenues in 2023 to $2.2bn from $1.1bn in 2022 and a net profit of $428 million. The company states that 70 percent of its customers globally are obtained organically or are referred by someone they know.

Between 2015 and 2022, the labor market situation of Roma has steadily improved in parallel with that of the non-Roma population, interrupted only by the epidemic, new data from Hungary’s statistical office (KSH) shows. 

However, the relative performance of Roma did not improve by much, with the difference in employment rates of the Roma and non-Roma population ranging from 24 to 28 percentage points, where it stood in 2022, since 2015.

For reference, the Roma employment rate in 2022 was 42.7 percent (47.3 percent including public sector jobs) and 75 percent (75.3 percent including public sector jobs) for non-Roma. More work needs to be done to get Roma into private-sector, higher-paying, and more secure employment.

Part of the problem is the level of education. Nearly four-fifths of Roma have at most a basic education, compared to less than one-fifth of non-Roma. This means that they are not only less present in the workforce but also half of the employed Roma do simple, unskilled work.

The unemployment rate of Roma did decrease from 27.8 percent in 2015 to 16.7 percent in 2019, although it then hit 17.6 percent in 2022.

Men vs. women

Roma also suffer a wider wage gap than non-Roma. Contributing to this undoubtedly is that Roma women have a larger number of children than non-Roma families. Thus, in 2022, 58.9 percent of Roma men aged 15-64 were employed, compared to only 35.8 percent of women.

Professional qualification

More than 64 percent of Roma youth aged 18-24 dropped out of school early in 2022, and statistics show that very few Roma in general obtain any sort of professional qualification.

Because of this, the proportion of Roma neither studying nor working (NEET rate) is more than four times that of non-Roma.

In 2022, 16.9 percent of employed Roma declared themselves to be employed in the low-skill public sector versus 40.9 percent in 2015. Also, every third employed Roma worked with a fixed-term contract in 2022, while in the case of non-Roma, this figure did not even reach 5 percent. 

All in all, between 2015 and 2022 the proportion of 18-59-year-olds living in a household without anyone employed decreased by 10 percentage points for Roma. However, this rate still stood at 18.8 percent, far above the 5 percent reported for non-Roma.

Geographical disadvantage

Location is also a factor. KSH noted a significant number of Roma live in areas of the country with an unfavorable labor market and/or in villages characterized by poor transportation; the latter not only suffer from few local jobs but also have no meaningful job possibilities within commuting distance.

In 2022, the vast majority of the Roma population, 35.9 percent, lived in Northern Hungary, while the fewest of them lived in Western Transdanubia.

Recent surveys show that Roma constitutes 7 percent to close to 9 percent of Hungary’s total population, not an insignificant number, and thus why the government has been dedicated to mobilizing those eligible to work.

Hungary’s only Roma female (former) MEP, Lívia Járóka, said last year that Europe would be poorer without its Roma citizens.

Consumer prices increased by 4.1 percent on average in July compared to the same month of the previous year, according to data released by the Hungarian Central Statistical Office on Thursday.

According to the director of MBH Bank’s Research Center, Zoltán Árokszállási, today’s data comes as an unpleasant surprise, noting that the real problem is the structure of inflation.

“Today’s data is an unpleasant surprise. It is not necessarily the size of the surprise that is big (as it is only a tenth of a percentage point in the annual index compared to the 4 percent we expected), but the structure of inflation,” he said.

Árokszállási pointed out that the fact service prices are still rising at an annual rate of over 9 percent is far from in line with the Hungarian National Bank’s (MNB) inflation target.

At 4.7 percent, annual core inflation is also above the 4.6 percent expected by the MNB. Food price increases were also above expectations, with no particular increase expected, but this group is outside the core inflation items.

“At the same time, the negative surprise in services is mainly due to a very significant increase in the prices of holiday services, while other product groups show more moderate price increases,” Árokszállási said.

“In addition, we can still expect the annual headline index to fall back below 4 percent in the coming months. What will be closely watched is the extent to which core inflation will continue to rise. By the end of the year, the headline index is still expected to be around 4.5 percent following today’s data release. On an annual average basis, we maintain our forecast of 3.8 percent for this year for the time being,” he said.

“The central bank’s inflation target of 3 percent could only be reached in a stable and sustainable manner in 2025, and even then only in the second half of the year, although average annual inflation could still exceed 3 percent next year (our forecast is 3.5 percent),” Árokszállási added.

Other commentators did not paint a rosier picture.

“The recent data contains some unique outliers beyond the expected fuel price spike, which resulted in a monthly repricing well above the seasonal trend,” said Péter Kiss, Investment Director of Amundi Fund Management.

 
Meanwhile, analysts at Portfolio indicated that inflation could end up at 4.8 percent or even higher given the latest data. This would translate into a much lower likelihood that the MNB will lower interest rates any further.

Amid a wave of local European protests against growing tourism, Budapest’s downtown 6th district is holding a binding referendum on whether to allow the continued operation of apartment-sharing platforms like Airbnb, district mayor Tamás Soproni wrote on his Facebook page.

The politician said that today there are 1,468 legal short-term accommodation units in the district, which is almost 8 percent of all dwellings.

“Short-term rentals affect everyone, and everyone in a different way. For some it means a living, for others it’s cheap accommodation. Many people hate it because it disturbs the peace of their homes, others don’t even notice that they are alternating between the people living next door. Is Airbnb a blessing or a curse? Should we ban it or leave it alone?” Soproni wrote, pointing out that there are arguments on both sides, noting that many people work in short-term accommodation as hosts and cleaners. In addition, the local government collected 670 million forints (€1.69 million) in tourism tax alone from this type of accommodation last year, but they also cause a lot of problems for residents and are partly the reason why inner-city districts are being emptied.

Voting in the referendum will be possible online and in-person for people aged 16 or over, resident or non-resident. The result will be binding: A majority of district residents will be able to implement the will of the majority of the people, as authorized by law.

To help residents make as informed a decision as possible, a brochure will be distributed to each household, following the Swiss model, with arguments for and against a total ban, and a conference will be organized with professionals and lobbyists, Soproni pointed out.

From there, he went on to say, the exact question on the ballot will be: “Do you agree that we should ban the renting out of condominiums as Airbnb-type accommodation in District VI?”

Hungary’s economy contracted by 0.2 percent in Q2 versus the previous quarter, while GDP grew by 1.5 percent year-over-year. Analysts polled by Portfolio had expected 0.5 percent and 2.3 percent growth, respectively, meaning data came in well below expectations.

After the first quarter saw growth of 0.7 percent on a quarterly basis, analysts believed the Hungarian economy had emerged from its recessionary stagnation and household consumption would rebound. Although consumers did spend in some segments, overall growth is nowhere near expectations.

The weak European economy and massive contraction in electric vehicle purchases have also hurt Hungarian exports. Aside from weak household consumption and exports, there was also no recovery in investment.

Minister of the National Economy Márton Nagy had a rather gloomy outlook, stating: “We expected a further improvement compared to the first quarter, but it seems that this is in danger, mainly because of industry.” Portfolio highlighted the minister’s dire tone, indicating he “may have additional information on which to base his significantly worse picture than market expectations.”

The belief is now that the Hungarian Central Statistical Office (KSH) will be releasing some lower numbers, Note: There is apparently no hard monthly real economic data available for the last month of the quarter, meaning estimates had not been able to take into account all data.

In its initial analysis, KSH notes construction and real estate as growth contributors and a shortfall in industrial activity.

In the first half of the year, the Hungarian economy’s performance grew by only 1.5 percent versus the same period last year. In light of this most recent data, the economy will need to rebound strongly (at least 2 percent, according to Portfolio) in Q3 and Q4 to meet the government’s 2.5 percent GDP growth forecast for the year.

Portfolio also notes the impact of agriculture and weather-related impacts on its output as having been decisive over the last two years. If this is so, then the recent heat waves and resulting crop losses in Hungary are not a good sign.

As expected by analysts, Hungary’s BBB debt rating was affirmed by Fitch Ratings, and its negative outlook was maintained. The agency made its decision on Hungary’s sovereign debt on Friday, June 14, after the other two major credit rating agencies had reviewed the country over the past two months and left their ratings unchanged.

The rating agency considers the month-on-month improvement in external trade data as a positive factor in determining the rating. However, the fiscal situation poses risks. Just this week, the Fiscal Council warned that the government needs to be very disciplined to maintain this year’s deficit target of 4.5 percent.

In its detailed explanatory note, Fitch said Hungary’s BBB rating is supported by strong structural indicators, investment-led economic growth, and solid net foreign direct investment (FDI) compared with its BBB peers. These are offset by high public debt relative to peers, unorthodox policy actions, and deterioration in governance indicators in recent years.

The outlook, although unchanged, is also significant: The negative outlook reflects risks around the political environment and public finance performance, which could undermine economic stability and put pressure on financing costs.

“The reports of the three most important credit rating agencies all reflect a high level of confidence in Hungary, thanks to the fact that the Hungarian economy has started to recover despite the intensifying war situation,” the Hungarian Ministry for National Economy wrote in a statement commenting on Friday night’s decision from Fitch. The ministry stated that the government’s economic policy measures are proving effective and efficient.

Following the successful reduction of inflation, the economy rebounded in the first quarter of 2024, with GDP growing by 1.7 percent on an annual basis and 0.8 percent compared to the previous quarter. This put the Hungarian economy among the front-runners of EU economies in the first quarter. The government will continue to re-launch economic growth for the rest of the year and will further increase the pace next year, with GDP growing by 2.5 percent in 2024 and 4.1 percent in 2025.

After an eight-year absence, the world’s largest ride-sharing company Uber filled its only blank space in Central Europe, returning to Hungary in a deal with Budapest traditional cab company Főtaxi.

After the Budapest Transport Centre, the National Transport Authority also gave the go-ahead for the Budapest launch on April 16, 2024, completing the formal approval process.

With the approval in hand, Uber’s team now needs to recruit drivers for the platform, which they can join within days. The service is expected to launch in Budapest in early summer, Uber added.

Uber is planning to enter the Hungarian market in partnership with Főtaxi, whose license application was submitted in February by F Mobilitás Kft., a subsidiary of Főtaxi. Főtaxi recently sent an internal letter to its drivers, reassuring them that they will only get better conditions with Uber’s return. The letter said that the cooperation would mean even more rides and revenue for its drivers, but did not explain why or how.

Uber left Hungary in 2016 after protests from traditional local companies that its business model was undercutting their livelihood.

Under the agreement, although Uber will operate under the umbrella of Főtaxi, its application and service will be independent of it.

“The Főtaxi app and service will not be affected by the planned entry of Uber. The Főtaxi app will continue to operate as before, and the Uber app will be available to call Uber drivers who will be transporting passengers with Uber Taxi,” Uber wrote in an answer to news portal Telex’s inquiry.

The poor general health condition of Hungarians is having an impact on the country’s economy, the Hungarian Central Bank (MNB) warned in its recent competitiveness report.

Hungary ranked 26th among the 27 EU member states in terms of health in 2023, with a score of 39.3, with only Romania ranking worse, according to the report.

Hungary’s score fell by 2.2 points compared to the previous year, dropping one place in the ranking. The Hungarian score is still well below the regional score of 52.5 and the EU score of 60.7.

According to the MNB, healthcare is part of national wealth and the foundation of a country’s most important resource: human capital. The health of the population is not just a personal and family matter, but also one of the most important issues for the national economy, as health affects a country’s economic performance and competitiveness.

Persistent ill health reduces active time at work and labor productivity, and premature mortality is also a major economic detriment.

Previously, the OECD reported that Hungary spends significantly less on cancer patients than the EU average. In 2019, 33 percent more people died of cancer than in other EU countries, and in 2020, 10 percent more cancer patients were diagnosed than the EU average.

According to the report, Hungarians do not take enough care of their health; for example, one in four adults is obese, the second-highest obesity rate in the EU, with only the Maltese being more overweight than Hungarians. Thirty percent of the population in Hungary has high blood pressure, and there are an estimated 1.5 million people with diabetes.

Hungary is also the most overweight among the Visegrád countries, with 25 percent of Hungarians suffering from obesity compared to 19 percent of the V4 population. By contrast, 16 percent of the population aged 18 and over in the European Union was considered obese in 2019, according to a recent analysis by the central bank.