Hungary

Hungary has not made sufficient progress on the European Union's concerns about its respect for the rule of law for the EU to release frozen funds, the EU's budget Commissioner Johannes Hahn said on Thursday, Reuters reported. The EU has frozen billions of euros that Hungary could receive from the EU's budget over concerns about corruption and the country's lack of respect for the independence of the judiciary and non-governmental organisations.

The European Union is considering unlocking billions of euros for Hungary that were frozen over rule-of-law concerns as it seeks to win Budapest's approval for aid to Ukraine including a start to membership talks for Kyiv, senior officials said, Reuters reported. Hungary cultivates closer ties with Russia than other EU states, and is seen as the key potential opponent to a decision due in December on whether to open accession talks with Kyiv, which would require unanimous backing of the union's 27 members.

Hungary's central bank could not cope with curbing inflation so the government stepped in and helped rein in price growth with its own tools, Prime Minister Viktor Orban's chief of staff said on Thursday, turning up the heat on the bank, Reuters reported. Hungary's inflation, which peaked above an annual 25% in the first quarter, is still the European Union's highest at 16.4% in August but is expected to retreat to around 7% by December. High inflation has come at a big cost, as the economy could end up in recession for the whole of 2023.

Hungary’s central bank cut its key interest rate by a full percentage point for a fifth month, ending an emergency monetary regime imposed last year to arrest a slump in the forint, Bloomberg News reported. The Monetary Council lowered the overnight deposit rate to 13% on Tuesday, matching the forecast of all economists in a Bloomberg survey. That’s on par with the level of the base rate, which is expected to resume being the effective key interest rate for the economy.

Hungary’s finance minister may propose raising taxes on banks after a year-long recession and the fastest inflation in the European Union blew the country’s budget off course. Shares in OTP Bank Nyrt., the country’s largest lender, plunged, Bloomberg News reported. Record bank earnings expected this year may prompt the government to expand a windfall tax on lenders, Finance Minister Mihaly Varga told economists on Thursday.

Hungary is likely to lower its key interest rate for the second straight month after central bankers signaled a retreat from a tightening cycle that brought borrowing costs to a European Union high, Bloomberg News reported. The central bank in Budapest will reduce the overnight deposit rate by a full percentage point to 16% on Tuesday, according to all eight economists surveyed in a Bloomberg poll. The decision, along with fresh inflation projections, will be communicated in a statement and a press conference at 3 p.m. local time.

Food prices have risen dramatically across Europe in recent months, jumping 19.6% in March from a year earlier and becoming the main driver of inflation as energy costs have fallen. But in Hungary, food prices have surged more than 45% over the year, according to EU statistics office Eurostat, far surpassing the next highest figure of just over 29% in Slovakia, the Associated Press reported.

Hungary’s capital Budapest adopted a “survival package” of cuts to avoid bankruptcy as the opposition-led city’s mayor blamed Prime Minister Viktor Orban’s government for squeezing revenue for political gain, Bloomberg News reported. In the latest clash between Orban’s nationalist government and cities led by Hungary’s fractured opposition, Budapest Mayor Gergely Karacsony said his office would stop paying taxes to the country’s Finance Ministry in an effort to keep providing services including public transport and paychecks for the city’s 27,000 employees.

Hungary's January annual inflation is expected to rise above 25% but in February price growth will start slowing which could then allow the central bank to gradually start reducing its interest rates, the minister for economic development said on Sunday, Reuters reported. Marton Nagy, a former central bank deputy governor, told state radio that the "very high" interest rates made the government's job difficult and harmed the economy. Prime Minister Viktor Orban's government is trying to avoid economic recession at a time when inflation is still running well above 20%.

Some European Union lawmakers warned the bloc's executive Commission against unlocking billions of euros in funds for Hungary, saying Prime Minister Viktor Orban was trampling on democratic norms, Reuters reported. The Brussels-based European Commission is expected next week to endorse giving to Hungary funds worth as much as a tenth of the country's estimated 2022 GDP after Budapest moves to improve anti-graft safeguards and the independence of its judiciary.