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Orbanomics

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Orbanomics[1] is the name given to the economic policies of Hungarian prime minister Viktor Orbán and his government since it took power in 2010. These policies are in reaction to the global economic crisis and the state of Hungary's economy in it. Instrumental in the invention and implementation of these policies was György Matolcsy, former Minister of National Economy and current Governor of the Hungarian National Bank.

History[edit]

After the 2010 parliamentary elections in Hungary, the newly elected Orbán government tried to negotiate an exemption from the strict European Union regulation setting a 3% limit on budget deficit. Since the request was turned down Hungary turned to taxation policies regarded as unorthodox by the international community to cover the deficit.

Policies and regulations[edit]

Approved reforms[edit]

Nationalization of private pension funds[edit]

All private pension funds were abolished and nationalized which are estimated around $12 billion in total.

Taxation[edit]

  • Increased main VAT from 25% to 27% in 2012, while decreased it for certain products (meat, fish, chicken, egg, internet, etc.) to 5% gradually from 2016 till 2018;
  • Decreased all corporate profit taxes from 10-19% to 9% regardless of revenue (previously, there was a non-flat corporate profit tax);
  • Decreased payroll taxes paid on employee salaries by few percentages;
  • Introduced new taxes on banks (transactions, withdrawals, etc).

Base interest rate[edit]

Decreased base interest rate gradually from 5,25% to 0.9% until May, 2016[2].

Foreign currency denominated mortgages[edit]

  • “(The FX mortgage conversion) was one of many negative and controversial decisions from Budapest and many people still find their decision-making controversial. But you have to acknowledge that so far it has worked,” said Marcus Svedberg, chief economist at asset manager East Capital.[3] As governments, banks and families across central Europe reel from the Swiss franc’s 20 percent surge against their currencies, those measures have allowed Hungary to escape the worst. And Poland, Croatia and Romania all are now mulling Hungary-style steps to cope with the rising franc.

Utility price cuts[edit]

In 2010, Hungarians paid some of the highest prices in Europe for utilities thanks to a lack of domestic energy resources as well as energy monopolies. In order to ease the financial burden on Hungarian families, the government undertook a gradual cut in public utility costs. By the end of 2014, Hungarian families were paying 25 percent less for energy than in 2010.[4]

Unemployment decrease[edit]

According to new KSH (Central Statistical Office of Hungary) figures for December 2017 to February 2018, the number of people with a job rose by more than 750,000 compared to 2010.[5] Following a steady downtrend of 68 consecutive months, the unemployment rate now stands at 3.8 percent, which places Hungary as the country with the fourth lowest unemployment rate within the EU.

Unapproved reforms[edit]

Internet tax reform[edit]

As part of its economical reforms, Fidesz started to draft the new version of the Tax Law for 2015. Minister of National Economy Mihály Varga announced the proposal on October 21.[6] According to the draft, Internet traffic would be taxed with a 150 Ft/GB rate irrespective of the type of data transmitted.[7] This resulted in 2014 Hungarian Internet tax protests and government dropped the idea of introducing this new tax.

Family policies[edit]

See also[edit]

References[edit]

  1. ^ "Subscribe to read". Financial Times.
  2. ^ "MNB.hu". www.mnb.hu.
  3. ^ "After Hungary's Swiss franc mortgage manoeuvre, a nod to Orbanomics". 26 January 2015 – via www.reuters.com.
  4. ^ "About Hungary - cutting utility prices". abouthungary.hu.
  5. ^ "About Hungary - Figures show that Hungarians with a job rose by more than 750,000 compared to 2010". abouthungary.hu.
  6. ^ "Jön az internenetadó (sic)" [Here's the internet tax]. Investor.hu (in Hungarian). October 21, 2014.
  7. ^ "Kiderült: brutális lesz az internetadó mértéke" (in Hungarian). 21 October 2014.