Economy 15 May 2025, 8:43am

Hungary EcoMin says investment should drive economic growth

MTI

The Hungarian economy needs to return to investment-led growth in the long term, said Economy Minister Márton Nagy, speaking at the annual general meeting of the Joint Venture Association (JVSZ) in Budapest on Wednesday.

Nagy said that this year has shown mixed economic results so far, with GDP in the first quarter weaker than expected. According to the minister, this is partly due to anaemic external demand, which is affecting Hungary's exports and domestic industry, while strong domestic demand and rising consumption are basically pulling GDP upwards.

He stressed that

Consumption-driven economic growth is not sustainable in the long run, consumption cannot be the basis for growth for years on end,

and we need to return to investment-driven economic growth in the long run.

The minister pointed out that both elements - short-term consumption stimulus and long-term investment promotion - are present in the government's economic policy.

Regarding consumption, he underlined that special attention is being paid to the labour market, which is currently stable with full employment and rising wages. He noted that last year was a record year for lending in the banking sector, with credit dynamics further boosted by the workers' credit programme in the first quarter of this year.

Nagy explained that

fiscal transfers will now really stimulate consumption.

He stressed that in addition to the workers' loan programme, major tax cuts and transfers to families and pensioners will now flow into the economy. He cited as examples increased family tax benefits, income tax exemption for mothers with children, VAT refunds for pensioners, inflation compensation for pensions, tax-free childcare benefits, the 'firearms money' payment and 13th month's pensions.

These represent cash outflows into the economy measuring in the hundreds of billions of forints,

said the Minister of Economic Development.

He noted that

consumption's 'bogeyman' is inflation.

Food inflation must be reduced below 5%, which is why margin cap is necessary, he stated.

Nagy mentioned that the government expects its two economic development pillars - the Demján Sándor Programme and the 150 factories programme - to increase the investment rate and bring it back to 25%. He added that they are also asking for the support of the Association's member companies in this effort.

Cover photo: Portfolio