Economy 25 August 2023, 8:46am

Viktor Orbán: the government had to show teeth, claws, and strength to the multinationals

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This year is about bringing down inflation, while 2024 could already be the year of growth, Hungary's Prime Minister Viktor Orbán told public radio MR1 in an interview on Friday. In August, there is also a chance of a rise in real wages, based on the data currently available, inflation will be around 16.0-16.1%, and wage growth could exceed this. The PM said that the new toolbox of the Economic Competition Authority (GVH) will remain in place. Orbán also spoke about Turkey being a key player in energy security in the foreseeable future, and about a plan to allow Hungary to buy electricity from Azerbaijan.

Wages and inflation

In response to a question, Orbán said that salaries were at a low level at the time of the regime change in 1989, so they started from rock bottom. "We have a big historical backlog, perhaps our children will say that we have had a more moderate wage policy. Employers and employees must come to an agreement. We help employers and workers negotiate, if there is no major hiccup, we don't get involved."

August will be the month where change is likely, with inflation at around 16.0%-16.1% and wage growth above that. We are going to have a tough autumn, so a lot needs to be done, but I hope that the rate of wage growth and inflation will be close to each other.

There has been a fall in real wages this year, which has created a difficult situation. It is important that the second half corrects the first half.

Economic Competition Authority's new tools remain in place

Some of the price increases were explainable: Hungary imports gas, oil and energy from abroad, and energy prices have skyrocketed. Last year, Hungary paid HUF 4,000 billion more for the same amount of gas and oil.

"But there was a part of the price increase that I did not see justified," Viktor Orbán said.

Prices are set by trade, trade has to be organised. There is no anti-market sentiment in Hungary, traders should be paid for their work. But what we have seen in the big retail chains is that they have kept their price levels much higher than a fair profit would have allowed. The multinationals felt that prices were out of control, that they could push the envelope.

Here the government had to show teeth, claws, and strength. We gave teeth and claws to the Competition Authority. The Competition Authority will retain the powers that help to curb price speculation.

The year 2024 will be the year of a resumption of economic growth.

The inflationary psychosis in European inflation was palpable, with overpricing measures driving up the rate of monetary deflation in the face of uncertainty and a general price rise. However, this was not so much the case for foreign retail food chains. On the one hand, experience shows that domestic outlets also increased at a similar rate, mainly due to high food prices. On the other hand, retail chains did not have any profit spikes last year at all that would have pointed to unjustified overpricing. On the other hand, economic policy has played an active role in the price increases: both special taxes and the uncontrolled weakening of the forint have accelerated retail inflation.

According to Orbán, Finance Minister Mihály Varga is not always enthusiastic when he sees how much the state supports Hungarian families, for example by reducing the utility bills. In his view, the European Union has a problem with the Hungarian overheads reduction scheme, and they want to abolish it, but he will defend the system.

Growth may come in 2024

Interest rates have risen, loan rates are high, so are the loans available to entrepreneurs. If there is no credit, there is no growth.

In 2024, we need lower interest rate loans to kick-start the economy. The real recovery will come in 2024.

The government has apparently started to frame the economic process in such a way that there will be a reduction in inflation this year and a recovery next year. This is a change from previous communication panels, and the change reflects that economic growth this year could be worse than expected. The government's official GDP growth target for this year is 1.5%, but this is certainly not going to be met, and it is questionable whether the annual average will even be in positive territory.

Energy security

"To be able to talk about the price of energy and overheads, you need energy. Security of supply comes before all else," says the Prime Minister.

The simple situation was that we agreed with Russia, the gas came and we were done. But the Ukrainians say that from 2024 no gas will come through them. And the Nord Stream pipeline was "blown up, they blew it up", and "everyone listening to the radio knows who did it."

Since we will continue to import gas, we will have to find another route. It has to come from the South.

Turkey is the key player in this, today the faucet is in the hands of President Erdoğan, we can get gas from there. We need to be on good terms with the Turks, we need to work together,

Orbán added.

Gas also comes to Hungary from Azerbaijan, and we buy gas from there too. Large amounts of electricity would be produced in Azerbaijan, and there is a plan to import electricity cheaply from there. LNG gas could also come to Hungary from Croatia.

Orbán said that the big European states are slow and stupid because they have not yet recognised the importance of Azerbaijan and the Turkic states. Hungary, on the other hand, foresaw ten years ahead and started to make friends in time, although for a long time no one understood what we wanted from these countries. He said that this was also the purpose of last weekend's diplomatic blitz, when he hosted the leaders of these countries in Budapest.