EGER, Hungary, Sept 21 (Reuters) – Hungary’s central bank warned on Thursday of further interest rate cuts, while the government faces a widening budget deficit as the European Union’s highest levels of inflation drag on it. suggested new taxes on banks to offset the drop in tax revenue. economy.
Shares of OTP Bank (OTPB.BU), Central Europe’s largest independent financial institution, fell on the Budapest Stock Exchange by 9:56 a.m. due to proposals for new taxes on Hungarian banks, about half of which are foreign-owned. It fell by up to 7%. GMT.
Last October, the National Bank of Hungary (NBH) raised its main daily deposit rate to 18%, the highest in the EU, to support the forint as it hit record lows.
Tuesday’s policy meeting is expected to end tightening by a further 100 bps to 13%, but Governor Giorgi Matolushi, speaking at an economic forum, said the government will continue to move forward in a gradual and data-driven manner in the coming months amid continued global economic risks. He suggested taking a type approach. world economy.
Sitting alongside Finance Minister Mihai Varga, the pair traded blows over the aftermath of the inflation crisis, with Matolushi harshly criticizing the government’s price cap, which he said backfired, while Varga said last year that He said the bank’s decision to cancel the base interest rate hike in September led to the sharp decline. In Forint.
“In 2021 and 2022, instead of supporting the central bank’s fight against inflation, the government added fuel to the fires in the economy with high deficits and price caps,” Matlusi said, adding that the annual inflation rate was up until December. It added that the growth rate could slow to 7% from its all-time high. The peak in the first quarter was 25%.
He said soaring inflation, which has pushed the Hungarian economy into its longest recession since modern records began, has caused growth in value-added tax revenues, a mainstay of Hungary’s budget, to stall compared to expectations for double-digit increases. .
Varga said Prime Minister Viktor Orbán’s government is considering a budget deficit target of 3.9% of gross domestic product (GDP) for 2023. He did not specify a new target, but said the shortfall would be lower than last year’s level of 6.1% of gross domestic product.
Varga said the government still aims to reduce government debt with next year’s fiscal deficit at 2.9% of gross domestic product (GDP), and expects average annual inflation to be 6% next year. added.
He said the government may consider imposing new taxes on banks, which have been earning record profits through high interest rates, as well as halting new investment and freezing government spending if necessary to curb the budget deficit. He said that there is.
Reporting by Gergely Szaccs and Krisztina; Editing by Gareth Jones and Kirsten Donovan
Our standards: Thomson Reuters Trust Principles.