Hungary prospects for 2021 depend on vaccines and EU talks

HUNGARY - In Brief 25 Nov 2020 by Istvan Racz

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Finance minister Varga spoke yesterday on Hungary's economic prospects, in the context of a three-year fiscal plan that the government is currently working on. He said that for 2020 they expect -6.4% GDP growth, a fiscal deficit of 9% of GDP and an end-year debt ratio of 78-80%. For 2021, there is an extraordinary high amount of uncertainty, depending on the availability of the prospective Covid vaccines and on the ongoing EU talks regarding the conditionality mechanism and the Hungarian-Polish veto against the EU's fiscal package.Mr. Varga said the main scenario is that by May-June, mass vaccination will have reached a degree at which current restrictions can be relaxed substantially and on a sustainable basis. However, the government also needs to prepare for a third wave of Covid-19 if efficient vaccines will prove to be available only significantly later.Regarding the rule-of-law mechanism and the veto on the common budget, talks may turn out to be so lengthy that in 2021, no EU transfers might be available for for Hungary except for the agricultural subsidies of some HUF500 bn. The other extreme would be a fully positive outcome, in which case some HUF2500 bn of EU transfers could flow in next year. On the latter subject, the EU Commission and the German presidency have emitted signals in recent days, suggesting that a compromise between the EU and Hungary & Poland was in the making. As they said, the solution would be one under which the conditionality mechanism would be introduced according to the accord reached by the Commission, the Council and the Parliament, but Hungary and Poland would be able to turn to the European court, questioning the conformity of the...