March 10, 2020 / 11:51 AM / a month ago

UPDATE 2-Hungary PM says budget needs to be redrawn as "brutal change" looms

(Changes slug, recasts with PM Orban’s comments)

By Gergely Szakacs and Krisztina Than

BUDAPEST, March 10 (Reuters) - Hungary will need to redraw its budgets for 2020 and 2021 and offer major assistance to economic sectors worst hit by the spread of the coronavirus, which threatens “brutal change,” Prime Minister Viktor Orban said on Tuesday.

Orban told business leaders uncertainty and caution in the economy would run high in coming months, adding he expected a pandemic, and the tourist season this year would “go down the drain.”

He said funds worth several billions of euros would be needed to help the sectors hardest hit by the global impact of the spread of coronavirus, and he expected proposals from business leaders by the end of April on concrete steps.

Last week the head of the Confederation of Hungarian Employers and Industrialists said Hungarian firms faced component shortages because of the coronavirus’s impact on supply chains, which could aggravate a slowdown that had already begun.

The government reduced its economic growth forecast to 3.5% from 4.0% earlier this year, partly due to the impact of the spread of the coronavirus globally.

Finance Minister Mihaly Varga told the same conference that the 2020 budget was planned with a 1% deficit and sufficient reserves. He also said tourism would soon be affected by the global spread of the coronavirus.

Varga said close cooperation was needed between fiscal and monetary policy in order to boost economic growth.

Hungary has 12 confirmed cases of the coronavirus as of Tuesday, according to the government’s official website.

Orban, a nationalist who has often clashed with European Union authorities over his clampdowns on immigration and a perceived erosion of the rule of law, has pursued a mix of go-it-alone economic policies, shifting Hungary’s debt financing towards domestic borrowing while keeping the budget deficit low. (Reporting by Krisztina Than and Gergely Szakacs, editing by Ed Osmond and Alexandra Hudson)

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