Hungary extends price freeze measures

Price caps remain in place

The cabinet fixed the price of the 95-octane petrol and diesel oil at HUF 480 per litre for three months on 15 November 2021, and capped the price of seven basic foodstuffs (granulated sugar, wheat flour, sunflower oil, pork thighs, chicken breast, chicken back and tail, and 2.8% milk) at their mid-Oct 2021 level for between 1 February and 1 May. The price caps have been extended several times since then and they were to expire on 1 October.

According to the latest government decision, however, the new deadline is 31 December 2022,

announced Gergely Gulyás, the PM's chief of staff, at an extraordinary press conference on Saturday.

The freeze on retail mortgage interest rates, which were to expire at the end of the year, will also be extended until 30 June 2023.

Márton Nagy, Minister for Economic Development, said that he also supported the extension of the price caps, but added that these are not normal market interventions. "At the same time, we are not in a normal market situation," he added.

At the moment, we do not see a turning point in inflation, and the central bank forecasts that inflation could continue to rise in the coming months. Thus, there is no justification for removing the price caps, but they will have to be phased out sooner or later, he said.

SME support scheme

Márton Nagy said that SMEs in the manufacturing sector will be the focus of the support scheme, and the government wants to help them because of rising energy prices. The targeted companies are energy-intensive businesses, those where energy costs were above 3% of net sales in 2021, according to the EU definition.

THE SCHEME WILL be launched ON 1 OCTOBER AND RUN UNTIL THE END OF 2023.

It will support businesses on the operating costs side and also on the investment side.

The operating aid is for the bills they are to receive in October, November and December. 50% of the increase in their energy bills (electricity, gas) will be paid by the state. (If someone's bill goes up to 60 from 10, the state will half of 50, not 60.)

An investment support programme will also be launched to improve the competitiveness of SMEs. The Széchenyi Card Programme will provide support for up to 15% of the self-financed part of the investment.

IN RETURN, THE GOVERNMENT IS ASKING SMES TO MAINTAIN THEIR EMPLOYMENT LEVELS.

In response to a question, Márton Nagy said that about 10,000 SMEs in the manufacturing sector will be affected by the announced programme. After the first three months it will be decided whether the programme should be continued.

There are 116 sectors that are energy intensive, the question was how to target them. The point is to keep SMEs viable after the energy crisis, so it has to be targeted. So it is no coincidence that they are targeting manufacturing, because manufacturing is the most important.

Nagy also said that the government has discussed two other programmes - a factory rescue programme and a new job protection action plan - but has not yet decided on them and will develop the framework for these in the coming weeks.

With the former scheme, the government intends to support investments by large, energy-intensive industrial companies.

A new job protection action plan is to help companies in many industries that could face difficulties in the coming months.