Hungarian gov't decides to introduce new housing subsidies
Highlights of the press briefing
- Investments and developments: according to next year's draft budget, more than 300 new investments will be launched in 2025 at a total cost of more than HUF 8,100 billion, including transport infrastructure and industrial innovation developments.
- Defence Procurement Agency systems hacked: Hackers demand $5 million, but the government claims there was no national security data breach.
- Housing support for young people: The government plans to introduce a monthly housing aid of HUF 150,000 in next year's budget, which will be available for rent and loan repayments.
- The government and China: Hungary attaches importance to economic relations with China and will not change its current strategy, despite the fact that the United States may take a different approach under Donald Trump's presidency.
- Transaction tax: The government will monitor the pricing policies of banks and will not support the passing on of taxes to the public by service providers.
I'm sorry, what? The government will not support it? If economic policy makers really thought the raised FTT and new transaction fees will leave the public unaffected for all eternity just because they banned banks from passing on the increased burden to retail customers until the end of 2024, they were out of their mind. They knew this would happen and acting surprised and blaming the banks (again) for trying to mitigate their losses is sickening.
- Student City and Fudan University: the Fudan University project is not going ahead, but the construction of Student City is still on the agenda.
- 24 December public holiday: The government will respect the result of the referendum if the people decide to make 24 December a public holiday. The government has so far introduced several public holidays, but the economic impact must also be taken into account.
- US-Hungarian economic cooperation: The government supports the ratification of the double taxation treaty and energy diversification, including the possibility of importing US LNG. (In July 2022, Washington cancelled its double taxation treaty with Hungary, which remained in force until 31 December 2023.)
- Increase in pensions and wages: Next year, pensions are expected to rise by 3.2%, while wages are expected to increase by 8.7%, which real wages will also rise. However, the real value of pensions will not increase as they only rise by the rate of inflation.
- Raising the limit for free cash withdrawals: The sub-committee on consumer protection of the Economic Affairs Committee has proposed to raise the threshold for free cash withdrawals to HUF 250,000 from HUF 150,00 currently, but the government has not yet decided on the issue.
New budget
The fiscal room for manoeuvre could be widened by the possibility of a peace accord in the Russia-Ukraine war as early as 2025, said Gergely Gulyás, the Prime Minister's Chief of Staff.
He referred to Donald Trump, elected to be the 47th U.S. President and to be sworn in on 20 January 2025, who repeatedly said he could settle the war between Russia and Ukraine in one day if he's elected president again.
Gulyás said there have been no discussions about an Orbán-Trump meeting which could be on the agenda only after Trump takes office (20 Jan.).
On wages, Gulyás said that the government still wants a three-year wage agreement between employers and employees, but that
government intervention is needed to bring the parties' positions closer together. With the support of the cabinet, a deal could be reached that would confirm the minimum wage increase for three years.
The 2025 budget bill was submitted to Parliament on Monday.
Housing subsidies on the way
The government has decided, in line with the objectives set out in the budget, to set up a housing subsidy scheme of HUF 150,000 per month at preferential tax rates to improve the housing situation, which will enter into force on 1 January 2025,
announced Gulyás.
The aid will be available not only for rent but also for loan repayments.
The system is based on the fact that there is currently a rule that housing subsidies have been regulated in the form of a HUF 450,000 per year subsidy ceiling. This will be retained, but on top of this,
employers may transfer partial subsidies for rent or housing loan repayments to employees under 35 years of age up to a maximum of HUF 150,000 per month - i.e. HUF 1.8 million per year with favourable tax rules. For taxation purposes, the rules of the SZÉP Card will apply.
A total of HUF 300 billion of new investment coming in 2025
Hundreds of investments will be launched, underway or handed over in the coming year, said government spokeswoman Eszter Vitályos. She added that they include transport infrastructure, education and health, among others.
In 2025, more than 300 new investments will be launched at a total cost of more than HUF 8,100 billion, of which HUF 480 billion will be in 2025.
Defense Procurement Agency systems hacked
According to press reports, the Defense Procurement Agency's (VBÜ) systems have been hacked and the hackers are demanding $5 million in exchange for classified data and not to make them public. To prove that they have the material, 46 screenshots were published. If they don't get the money, they will publish the rest.
We are talking about material that is extra sensitive from a national security point of view, defence procurement, internal correspondence, the real capabilities of the Hungarian armed forces, 444.hu reported.
Cybersecurity threat experts from within and beyond Hungary's borders could have known on 6 November that the VBÜ had been attacked, and the first teaser-like screenshots of concrete evidence were published on 8 November, supposedly as "motivation" to make the state-owned company pay.
INC Ransom Ransomware Alert Defense Procurement Agency Private Limited Liability Company (VBÜ Zrt.) VBÜ Zrt., a defense procurement agency based in Budapest, Hungary, has fallen victim to INC RANSOM ransomware. The group claims to have access to the organization's pic.twitter.com/CEcv69hQdi
— FalconFeeds.io (@FalconFeedsio) November 8, 2024
The attack was also highlighted by cybersecurity expert Ferenc Frész on his social media page. In practice, the current attack could mean that the Defense Procurement Agency's employees have not had access to any of their material since the beginning of November, unless they had a backup of the file server.
Gulyás stressed that
only military procurement plans and data have been obtained, but nothing that would harm Hungarian national security interests. The authorities are still investigating the scope of the leak.
The Defense Procurement Agency manages priority defence procurement. Established in December 2019 and wholly state-owned, the aim of the VBÜ is to "make defence and security procurement by government-run public organisations more transparent". Its exclusive remit includes the procurement of military equipment and services for defence, law enforcement, policing, crime prevention, criminal procedure, correctional services, national security, border police and border traffic, disaster management, tax and customs, guarding, defence and self-defence.
The documents obtained by the hackers include non-public materials containing the prices and quantities of purchased defence equipment and supplies, as well as those containing defence capability development plans for several years ahead.
The disclosure of non-public pre-decisional and budgetary material, internal correspondence and staff data would also pose a significant security risk.
The company behind the attack, Inc. Ransomware cybercriminal group typically waits two to three weeks before coming forward, which suggests that the story could have started in the second half of October. Incidentally, on its website, the VBÜ reported an outage between 18 and 22 October.
The Defense Ministry responded to an enquiry by saying that the organisation involved in the attack does not handle data on military structures, but they did not reveal what information may have been leaked.
The Trump effect
The aim of cooperation with the new US administration is to promote the interests of the Hungarian economy, while also taking into account protectionist economic policies that could have a negative impact on the European and Hungarian economies, said Gulyás. The imposition of protective tariffs by the US would be detrimental to Hungary, he added.
However, there are areas and instruments that can counteract these negative effects,
noted Gulyás, without providing details on the countermeasures.
Sticking to China
Hungary considers trade relations with China to be key, and in this area US and Hungarian interests meet, even if the Trump administration supports other measures,
said Gulyás.
He stressed that although the new US administration's policy towards China is still in the process of being formulated, it is important for Hungary that trade relations and Chinese investments continue, as they ensure competitiveness in the industrial sectors in Hungary.
According to Gulyás, the Americans are also aware that maintaining relations with China is crucial, especially for the financing of the US national debt. Hungary continues to believe that an agreement between China and the US would be beneficial for both sides.
No geographical focus in SME subsidies
Responding to the issue of economic disparities between regions and support policies, Gergely Gulyás said that although Tibor Navracsics, Minister of Public Administration and Regional Development, is calling for the use of geographically-based support,
the government prefers to maintain the existing support system so that all small and medium-sized enterprises can access support regardless of the region in which they operate.
Gulyás stressed that in recent years significant developments have been carried out in areas such as Debrecen and Nyíregyháza, which are no longer considered backward regions.
He added that the focus should be on reducing north-south disparities within the country, but that the government's position remains that
it will not make aid regionally based, as the performance of small and medium-sized enterprises does not justify excluding central regions.
Budget gap could widen a lot next year?
Gergely Gulyás also responded to questions on the 2024 budget deficit target and expected VAT revenues.
The minister said that the budget deficit target for next year was set at 3.7% of GDP, a decrease from the 2024 goal of 4.5%. For this year's figures, he said, "it could be as high as 4.6 or 4.7% , but the year is not over yet."
He added that although the VAT receipts in the budget may show a slight increase or decrease - although he was not sure about this in relation to the draft budget - he did not think that this necessarily indicates a decline in trade. Gulyás assured that optimistic economic forecasts, which expect GDP growth, do not justify a higher deficit target.
Financial transaction tax - What will the gov't to to protect (retail) customers?
As regards announcements that banks will pass on the costs of a higher (and new) financial transaction tax to customers, the minister stressed that the government does not support service providers passing on the tax to the public, and the Economy Ministry is monitoring banks' pricing policies.
Gulyás said that the government is trying to protect the public from price increases, and new measures such as tax-free transactions up to HUF 50,000 will also help to reduce banks' costs.
The cabinet is constantly monitoring the banking market, and although commercial banks may increase their fees from year to year, the government does not intend to interfere in market competition, he added.
Gulyás denies Hungary had the highest electricity prices in Europe
Addressing a question about the government's energy policy and the energy market situation, i.e. that Hungary has had the highest electricity prices in recent days, Gergely Gulyás said
such news do not reflect the reality.
According to him, making such statements based on the daily changes in energy prices and market fluctuations is just political manipulation. He said that the most important thing for the Hungarian government is to keep energy prices at the most favourable level. Gulyás said that nuclear energy plays a key role in this, as it is the only way to meet future energy needs in a sustainable way.
He confirmed that the government was also considering nuclear energy, the expansion of the Paks power plant and the construction of smaller gas-fired power plants to ensure cheap and stable energy in the future.
Background information
Válasz Online reported that Hungary had the highest electricity prices in Europe as of 11 November. It emphasised that this crisis is not the result of sanctions or the ongoing war but rather signals the failure of Hungary’s energy strategy.
The publication also shared an image based on a report from T-Energy Consulting, showing that in Hungary, one megawatt-hour of electricity costs EUR 306.33. By comparison, the same amount costs between EUR 100 and EUR 170 in Western Europe, even less in Northern Europe, and around EUR 190 to EUR 270 in Eastern Europe.
More to follow!
Cover photo: MTI Photo/Szilárd Koszticsák
