At the end of September, the gross consolidated debt of the Hungarian state was 42.106 trillion Ft. (US $130.1 billion), according to data published by the Magyar Nemzeti Bank (MNB) on the last day of 2021, making it the highest it has ever been in the country’s history.
Hungary’s public debt increased by 3.688 trillion Ft. ($11.4 billion) since the beginning of last year, and is 20.116 trillion Ft. ($62.1 billion) more than in December 2010. The debt-to-GDP ratio was 80.3% at the end of September, rising to 2011 levels, although it peaked at 83.6% when the Orbán government came to power.
However, public debt is likely to have eased somewhat in the last quarter of 2020, as the government embarked on debt-cutting operations to attempt to bring the debt-to-GDP ratio below 80.1% in December.
The Hungarian economic growth is expected to be over 6% in 2021, but public debt is expected to decrease only minimally, statistically-speaking. According to a recent report released by the Ministry of Finance, December’s debt ratio will be 79.9%, which could decrease to 77% of GDP in the election year of 2022.
The Finance Ministry expects the debt trajectory to decline rapidly in the coming years as a result of economic growth and fiscal adjustments. In its three-year forecast, the ministry expects the level of public debt to fall to 69.3% of GDP by the end of 2025, which would correspond to its 2018 level.
Public debt has skyrocketed in recent years all over the world, as governments have had to provide families with subsidies to replace income and businesses with lost revenue in 2020 and 2021 due to widespread closures from to the coronavirus pandemic.
However, Hungary has been quite stingy compared to other countries with providing benefits to the unemployed and socially disadvantaged, as the government has largely focused on boosting investment instead. In this respect, the Hungarian government has spent thousands of billions of forints on subsidies to state-owned and pro-government companies, leading to a growth in the Hungarian public debt by several trillion forints.
At the current pace, a 60% debt-to-GDP ratio can be realistically achieved by 2030, unless Hungarian and world economies are hit with another shock like the coronavirus or 2008 economic crisis.
The 60% indicator is one of the criteria for adopting the Euro as a national currency, but the Fidesz-written and adopted Fundamental Law states that debt should be 50% of gross domestic product. However, the economic ramifications of the coronavirus pandemic has made this goal, like the introduction of the Euro, even harder to achieve.