In his address delivered at the business year-opening event of the Hungarian Chamber of Commerce and Industry, the Prime Minister highlighted that after 2010 the government launched fundamental changes also in the economy, and the economy that we are talking about today is not the same as the one that we lived in until 2010. What is at stake in the upcoming elections is “whether we will remain in the new one, or will return to the old one,” because “our challengers” deny everything that happened after 2010, he explained.
He said they deny the connection between work and support, despite the fact that one of the greatest post-2010 innovations was that “we connected all social transfers to work; meaning all the money that we made available to the people from the economy in the form of help”.
He said he does not want to make any concessions “in the interest of a socialistic economic policy”. It is not only that “we are anti-communists politically,” but “we are positively opposed to all communistic, socialistic approaches in economic policy,” he pointed out. He added that this was a philosophical conviction.
He recalled that in the previous regime the economy had been destroyed, and it had been destroyed not only from the respect of performance, “but after they killed private property, by doing so they also killed the culture-creating force of private property, and I do believe that private property has culture-creating force”. At that, it creates a good culture, one on which you can build a good life, and on which a nation, too, can build its own future, he pointed out.
He said this is why they remain on the foundations of private property, they want people to have their own homes, their own savings, their own land. This is not only good for the economy, “but also enhances the culture that we must take care of things as well as of our own lives,” he explained.
He took the view that if you have something, you must take care of it, and this results in a different kind of culture and behaviour; “you can’t just live hand to mouth,” and it is only private property that curbs the human instinct of “taking out one loan after another because you know that if you’re too much in debt, then you’ll lose your property”. Therefore, “the government will – provided that it remains in office – positively and strongly support private property out of a philosophical conviction,” he stated.
He said Hungary must gain in strength through capital, and the reason they are entering into a strategic agreement with the Chamber is that the Chamber has a way of thinking which regards the accumulation of capital as a value. We need allies who are able to help to gain social support for the policy that results in Hungary becoming stronger, he pointed out.
Mr Orbán also said last year the economy expanded by 7.1 per cent; there was a similar growth in 1977, it was 7.6 per cent at the time, “evidently, amidst entirely different circumstances”. Last year, Hungary had the second highest investment rate in the European Union, he added.
He stressed that the crisis was a significant stress test for the new economy; the question was “whether the economic system that we built after 2010 will endure the pressure, the stress, the shock that the pandemic lasting for two years caused the whole world,” and it did. The crisis was managed successfully in Hungary; our recovery has been swift, intensive and V-shaped, and the other leg of the V, the second phase is longer than the first one, he argued.
He remarked that the most important reason for the successful management of the crisis is that “the crisis caught us in good shape”.
He took the view that the Hungarian economy proved to be resilient during the pandemic because it has internal economic complexity, and in this respect, Hungary is the world’s 10th most competitive country.
In the context of complexity, he also said Hungary is strong in the machine industry, is becoming ever stronger in the food industry, the chemical industry and the manufacture of electronic goods, and is now venturing into new sectors such as the defence industry, attempting to engage in the manufacture of military aircraft.
He highlighted that we are a transit country; however, in the past 20 to 30 years, Hungary has not invested enough attention and money in making the most of the economic advantages arising from its geographical situation. Hungary has a vested interest in everything – other than wars – going through us, Mr Orbán stated, adding that within the V4, Hungary has the largest network of motorways per capita.
He took the view that we must equally improve our railway capabilities as well as our air transport.
He said those who attack developments such as the Belgrade-Budapest railway line or the Fényeslitke-Záhony projects “wish Hungary the worst”: not only that there should be no such developments in Hungary, but that others take advantage of these opportunities. In a regional race, this is none other than working for the competition which is unacceptable, he said.
Regarding the sovereign debt, he highlighted that it cannot go above 80 per cent even during the crisis because if that happens, then “nothing will save us from fiscal alcoholism”. On the other hand, he continued, in 2010 when he took over the country’s treasury, the sovereign debt was above 80 per cent, and so he regards not exceeding this level if they can help it “as a point of honour”.
He took the view that in the territory of the European Union, other than in Hungary, you have to look hard to find a crisis management solution which did not upset the fiscal balance. In the meantime, he pointed out, the labour market, too, has remained stable, not since 1990 have there been so many people – 4,700,000 – in employment in the Hungarian national economy as there are today.
Regarding inflation, the Prime Minister said even if they succeed in reducing the Hungarian inflation rate from the present level of above 7 per cent to below 6 per cent by the end of the year, the country will continue to exist in a high-inflation environment in the coming years as well. In his view, one of the reasons for this is that Brussels is unable to harmonise its climate policy with its economic policy, meaning that it adopts decisions which boost energy prices.
Additionally, he continued, we also have here the Russia-Ukraine conflict and the conflict surrounding the Nord Stream pipeline. He stressed that the earlier Western European calculation – that the Russians need as much to sell their gas to us as we need to buy it from them – has been refuted because while this is true when energy prices are low, due to the high energy prices the equation changes as the Russians are able to make much more money selling less gas.
He was of the opinion that “time is not on our side, but on theirs,” and the great mystery of the months ahead is what will come out of this and what impact it will have on inflation. He observed at the same time that “as we know the Russians better,” Hungary concluded long-term gas supply agreements with Russia, and will even raise the quantity.
Regarding the policy of “four ceilings” – the ceiling on energy prices, the ceiling on fuel prices, the ceiling on interest rates and the ceiling on food prices – Mr Orbán took the view that at a time of crisis, there is no normative economic policy, and therefore, the government had to intervene. He expressed hope, however, that other than the policy of the reduction of household energy prices, with the improvement of the inflationary situation, they will be able to phase out the other three measures from among the means that serve to regulate the economy.
“I’d like to reassure everyone that we haven’t gone mad, and we have no intention whatsoever of resurrecting a price bureau,” he said.
In his address, the Prime Minister also said he believes we must avoid five potential economic traps in the next ten years in order for the Hungarian economy to continue to thrive.
He said “the engine’s working, the till keeps ringing,” “everyone has jobs,” meaning that there is no need to change course. In his view, however, in the future, five potential trap situations could arise in the Hungarian economy that “we could run into unless we make decisions in good time”.
He described the trap of high foreign ownership as the first such situation, while the second potential trap is a situation where large exporting companies play a dominant role and there are not enough quality small and medium-sized businesses among the exporting companies.
The Prime Minister took the view that the third trap is the trap of a negative profit balance, the fourth trap is that of duality, while the fifth trap is the countryside falling behind.
He said between 2010 and 2020, there was a spectacular improvement in the percentage of Hungarian ownership in the energy sector, the banking sector and the media. However, in the insurance sector, in the telecommunications industry, in the construction materials industry and in food retail, “we’re not doing well”. He stressed that without foreign capital, we are not competitive, there is no full employment and there are no new technologies, meaning that we cannot pursue an anti-foreign investment policy, but we must at the same time strengthen Hungarian ownership.
He said while in 2010 there were just two thousand domestic exporting businesses, today there are as many as 12,000; however, foreign-owned companies are responsible for 80 per cent of export revenues, while Hungarian businesses account for a mere 20 per cent. Therefore, the goal is to increase the contribution of local businesses to exports to 30 per cent. He took the view that we also need markets that offer a higher profit rate than the Western one, such as the Balkans and China, and so we must target these areas.
Regarding the trap of a negative profit balance, he said a number of Hungarian businesses are expanding; however, we are not doing well compared with our competitors in the region. “Outward investment, outward investment, outward investment, meaning that we must mobilise our resources, our knowledge, our skills” in order for Hungarian companies which are able to make a profit to gain a foothold in their respective areas of operation, he explained.
In the context of duality mentioned as the fourth possible trap, he said foreign companies in Hungary are more productive than Hungarian businesses. At the same time, there is a promising trend because the productivity of Hungarian businesses is increasing faster than that of foreign companies, meaning that duality is on the decrease, he pointed out.
He took the view that local businesses need increased digitisation and automation, Hungarian, businesses, too, must use advanced digital technologies, and “we are ready to provide help with this”. Research and development expenditures, too, must be increased.
The Prime Minister mentioned the falling behind of the countryside as the fifth possible trap. In the past few years, they have continuously developed Budapest because a country like Hungary “is unable to make its mark on the map if it doesn’t have a settlement that is a worldwide sensation,” he said.
He pointed out that in the coming two years, they would like to spend three times more on the development of the countryside than before. The development of cities forms an important part of the development of the countryside, each year, HUF 50 billion is available for that purpose, he said.
He highlighted that villages additionally represent a value because living in a village to the same high standards as in a city forms part of Hungary’s identity, and it is not in Hungary’s best interest to abandon a fantastic civilisational heritage that is embodied in the system of villages. In 2021, HUF 190 billion was spent on the development of villages, while this year, an allocation of HUF 93 billion will be available, he added.
According to Mr Orbán, we can avoid these potential traps by making sure that sufficient financial resources are available, and this means that the state must continue to provide assistance. “We need money, tax cuts, investment grants, capital, credit and guarantee grants, with the aid of state resources,” he listed.
He observed that in the 2021 budget, as part of the economy reopening action plan, they used 12 per cent of GDP for such purposes – for developments – while this year, they intend to increase this to 15 per cent.
Regarding EU funds, the Prime Minister said Hungary has a negative profit balance, and the funds coming from the European Union compensate for 77 per cent of our negative profit balance. Therefore, it is only right “to speak to foreign investors and bureaucrats from the European Union with due pride and in the language of the ‘kuruc’ [Hungarian anti-Habsburg insurgents], not in the language of the ‘labanc’ [the Austrians and their supporters] as they owe us, not we them”.
In the context of the recovery facility, he said Hungary has not received the funds it is entitled to for political reasons, due to the child protection legislation. However, the position of the EU is utterly unfounded both morally and legally.
He took the view that in this battle – in which a court ruling has recently been adopted – Hungary is winning, not losing. In his view, the court judgment indicates that “our opponents have lost, not us”. He said while the court ruled that the common EU funds can be linked to political criteria, in their reasoning they also highlighted that there can be no general connection made between the rule of law and money.
Our opponents lost here, the Prime Minister pointed out, taking the view that this practice can only be applied in specific cases, “there is no such thing that they say that there is no freedom of press in Hungary, so we won’t give you money”.
At the same time, he stressed that “though we’re right, we don’t have money,” and so they are advancing these funds from the national budget. However, according to their calculations, this money will be disbursed fully or in part before the end of this year, and so the deficit which has increased due to the advancing of funds will go down.
Regarding tax reductions, Mr Orbán highlighted that the Hungarian tax system is the 13th most competitive in the world, Hungary’s corporation tax is the world’s sixth most competitive, while Hungary’s personal income tax is the world’s ninth most competitive. He said “this is the hinge” on which the Hungarian economy turns, and if the hinge falls out, “the door comes down”.
In his view, we must therefore make every effort to protect the present system of taxation because if the tax system is taken apart, the competitiveness of the economy will immediately start deteriorating to a dramatic extent.
He also said the rate of tax centralisation has never before been as low as it is at present, it currently stands at 35 per cent of GDP, while in the past few years, the tax wedge has decreased by 12 per cent, from 53.1 per cent to 41.2 per cent.
He warned that wages can only be increased to a level where employers and workers together agree to raise them without the risk of increasing unemployment, and the government will continue to facilitate this as it has done to date. He indicated that the under 25s are not required to pay income tax, the tax wedge of people with two or more children, too, is better than the EU average; however, the tax wedge of people with average earnings with no children is higher than it is in the EU, and so it will have to be reduced.
In the context of knowledge centres and businesses, the Prime Minister said it is not good when theory and practice are separated, they must be brought together. He drew attention to the fact that as part of the model change at universities, they will invest HUF 2,700 billion in education, but in actual fact, these funds will also serve the development of the economy. Hungarian universities will have to resemble Western Europe’s competitive universities, he stressed.
Mr Orbán recalled that after 2010, the government concluded an agreement with the Chamber of Commerce and Industry. They have honoured and implemented each and every point of that agreement, and this is how it is possible that today 4.7 million people have jobs.
He stressed that the Chamber can rest assured that if they conclude another agreement with the government, that, too, “will be observed to the letter”. “This has been so to date, and will be so henceforth, too,” he stated.
Mr Orbán took the view that the agreement concluded with the Chamber contributes to the attainment of the country’s overarching strategic goal that each year Hungary’s economic growth should exceed the EU’s by 2 to 3 per cent.
“If we’re able to adhere to this agreement in the next ten years, by 2030 we will reach the European Union’s average level of development. We will have defence capabilities, we will have prestigious universities, we will have a technological advantage compared with others in the region, and we will also be able to combine these with good political leadership in a way that will turn this into a Hungarian national competitive advantage not only in the region, but also beyond,” Mr Orbán said.