New details of a fiscal action plan were revealed this morning

HUNGARY - In Brief 04 Apr 2020 by Istvan Racz

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Following weeks of growing public expectation, the government this morning went further to reveal its fiscal action plan in response the Covid-19 crisis, and also promised to announce many more details over the coming week.In total, government speakers are talking about the fiscal intervention to reach 18-22% of annual GDP. For now, we advise the reader to treat this with a good amount of caution, as what has been specified so far is a total of HUF 2000bn or 4% of GDP, as regards the sources of funds, and HUF 620bn or 1.2% of GDP, as regards the measures to use those funds. Anyway, somehow we find it positive that the government looks after the availability of funds first, and starts to spend the money only when it has been secured.In terms of details, the government is setting up two separate funds, one to cover expenditure directly to fight the epidemic (HUF 663bn or 1.3% of GDP), and another one (HUF 1345bn or 2.7% of GDP) to deal with the economic consequences. The first one is to include available fiscal reserves plus HUF 36bn from a new tax on food trade (essentially targeting large multinational retail chains), HUF 55bn from banks (the source of that has not been immediately clarified but most probably a part of the existing extraordinary taxes on the sector will be redirected to this purpose) and HUF 36bn from local governments (taking away the latter's existing taxes on locally registered cars). The second fund would be filled up fully by the redirection of funds approved within this year's government budget, including mainly HUF 423bn of the existing Employment Fund, in addition to HUF 922bn taken away from various ministries' annual budgets.As to the uses of...