"One-Pager" Policy Briefs

Hungary - United States Relations: An Intro.  Historical Overview (PDF)

Posted: 9 April 2020
This report presents a brief introduction to Hungarian-US relations since 1920.

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Economic and Policy Response to Coronavirus

IMF Update on Policy Actions in Hungary

The following information is copied straight from the IMF for your convenience. Also, find it here:

First wave. . The first case of COVID-19 was reported on March 4, 2020.The economy was hit hard by the outbreak as it is tightly intertwined globally through supply chains and tourism. The government declared a state of emergency on March 11 and implemented various containment measures, including travel and activity restrictions, and mandatory distance learning for schools and universities. On March 27, mandatory shelter-in-place in place was imposed, except for essential business and activities (e.g., food shopping, healthcare).

Reopening of the economy. Starting May 4, 2020, the economy gradually reopened. Stores, malls, museums, churches, were allowed to reopen and outdoor seating is permitted in restaurants. Students returned to schools and daycares in June, and summer camps were open. Ordinary health services restarted. Sports could be conducted in closed doors and music and dance events with less than 500 participants could be held. The state of emergency was lifted by June 18 but some of the emergency measures remained in place and the government was allowed to declare a health crisis for a period of up to six months (extendable indefinitely) without parliamentary authorization. Social distance rules were expected to be heeded everywhere and policies and fines regarding wearing masks recently have become stricter

Second and third waves. While the first wave of the pandemic relatively spared Hungary, cases rose rapidly starting the end of August. In response, border restrictions were imposed in early September and the state of emergency reintroduced on November 4, 2020. The government reintroduced a number of containment measures, including a curfew from 8pm-5am, restricted opening hours for shops and other businesses, and restaurants closures, and restriction on hotels guests and gathering, and has been reviewing and adjusting them periodically. The second wave abated by end-November 2020, but cases rose again rapidly in February 2021, including as new, more contagious, variants of the virus reached Hungary. In light of this situation, the state of emergency has been extended until May 22, 2021. Starting March 8, all non-primary shops services, kindergartens, schools, and gyms have been mandated to temporary close.

Vaccination:Vaccinations started in late December. Hungary was the first EU country to authorize vaccines other than collectively procured by the EU. If deliveries are timely, the authorities are hopeful that most of the population could be vaccinated by mid-to end-summer.


Key Policy Responses as of April 2, 2021


  • A first wave of fiscal measures were introduced earlier in the epidemic, including, on the revenue side, measures to alleviate the fiscal burden on businesses: (i) employers' social contributions will be lifted in the most affected sectors; (ii) the health care contributions will be lowered through June 30, 2020; (iii) around 80,000 SMEs (mainly in the services sector) will be exempt from the small business tax (the payment of the tax by other companies in affected sectors will be deferred until the end of the state of emergency); (iv) the tourism development contributions will be temporarily cancelled; (v) media service providers will be given a tax relief for incurred losses of advertising revenue; and, (vi) procedures for collecting tax arrears will be suspended during the state of emergency. On the spending side, about HUF 245 billion (0.6 percent of GDP) was reallocated to the healthcare sector. On September28, 2020, the government rolled out on a tax relief package for the benefit of families and businesses, including a tax relief on fringe benefits for tourism companies have been extended through end-June 2021. On December 8, state support (through wage subsidies, exemption from payroll taxes, etc.) to the tourism (now including travel agencies), art, entertainment and leisure sectors was extended till end March 2021.

    On April 8, 2020, a new package of new measures was announced, supported by the creation two new funds, the Anti-Epidemic Protection Fund and the Economy Protection Fund. The latter Fund will be financed through new taxes on the private activity and reallocations from ministries and from the Employment Fund. Their spending targets (i) job protection, notably by subsidizing wages to companies on workers who were put on shortened work hours (with rules that were made more flexible on April 23); (ii) job creation by supporting investments worth a total of HUF 450bn; (iii) support for priority sectors, including tourism, health, food, agriculture, construction, logistics, transport, film and entertainment industries; (iv) provision of interest-subsidized and guaranteed credit facilities to Hungarian companies; (v) an extra week of pension will be paid out every February during 2021-24.

    On April 16, 2020, the government introduced three new export support measures through the state-owned Eximbank: (i) EUR 800,000 grant for investments of export companies; (ii) preferential working capital loans, and (III) a new guarantee and insurance scheme. On April 23, the state-owned development bank MFB launched a HUF 1,490bn package of financial support instruments for companies, consisting of three loan products, two guarantee instruments and four capital programs. On May 7, the government announced it will purchase up to HUF 150 billion (0.3 percent of GDP) of bonds issued by banks in order to support lending during the crisis and to ensure financial stability. On May 20, the government announced a new wage subsidy program for new hires, with the condition for a company of keeping a worker for at least nine months. Interest-free loans to SMEs will be available from June 12. Half of the program’s budget will be available for investments, while the other 50 percent is intended to finance liquidity and operations. The highest amount available for investments is HUF 150 million, while asset and liquidity financing loans are capped at HUF 300 million. On August 25th, the government announced that it will not be expanding the wage subsidy scheme for all as of end-August, but only for most affected sector till June 2021. Will March 22, wage subsidies and tax relief available to the hospitality sector will be extended to all sectors subject to the new lockdown.

  • Since the start of the pandemic, the central bank (MNB) increased access to liquidity through: (i) an increase in the regular forint-liquidity swap stock at regular auctions; (ii) the introduction of the daily provision of one-week forint-liquidity swaps; (iii) the expansion of eligible collateral; (iv) the introduction of a long-term unlimited collateralized lending facility; and (v) suspension of penalties for unmet reserve requirements. On April 1st, it introduced a one-week deposit tender at the Lombard rate, which effectively tightened overall liquidity and eased depreciation pressures on the HUF. On April 7, the MNB announced (i) a change in the overnight lending rate by 95 bps to 1.85 percent, making the interest rate corridor symmetric (with the overnight deposit rate at -0.05 percent; the base rate at 0.9 percent; and the overnight lending rate at 1.85 percent); (ii) an increase in the one-week lending rate to 1.85 percent; and (iii) the elimination of the target on the amount of the liquidity injection or withdrawal to give greater flexibility to monetary policy. On June 23 and July 21, the MNB reduced the base rate by 15 basis points each time, from 0.90 to 0.60 percent, while the interest rate corridor remained unchanged (-0.05 to 1.85 percent). On 4 May, quantitative easing program was also launched, consisting of buying government securities on the secondary market, and the mortgage bond purchase program re-started. On October 6, the MNB raised the limit on its purchases of certain government bonds from to 33 to 50 percent of the outstanding bond stock while extending the range of assets available for purchase to government-guaranteed debt securities. On September 24, the MNB hiked the 1-week deposit rate by 0.15 percent to 0.75 percent in order to reduce inflationary pressures and currency depreciation. On September 8, the MNB introduced a new forex-liquidity swap facility. The facility seeks to improve the effectiveness of the monetary transmission mechanism and reduce the volatility of yields on the domestic forex swap market.

    On April 7, 2020, a new SME lending program was also announced (FGS GO!) with increased amounts and increase in the interest rate subsidy. On July 2, the MNB relaxed its conditions, including allowing the use of loans for investment abroad and loosening conditions for borrowing working capital loans. On November 18, the NBH expanded program by HUF 1 tn. The corporate bond purchase program (BFGS) remained in place and maturities of eligible bonds were extended and amount per business group was increased. On September 22, MNB raised the amount available under the program to 750 billion forints from HUF 450 bn previously. On November 18, it raised the ceiling to HUF 2 tn (4.3% of GDP) having already purchased HUF 793 bn (1.7% of GDP) of bonds under the program. The MNB intends to sterilize liquidity injected through both the FSG GO! and BFSG programs through a preferential deposit facility bearing tiered interest rates up to 4 percent.

    Measures were also taken to provide financial relief to households and corporates borrowers, including: (i) the provision of a grace period of repayment of loans to the Growth Funding Facility (subsidized lending to SMEs supported by the MNB); (ii) the extension of short-term loans to businesses until June 30; (iii) a repayment moratorium on all existing loans, corporate and retail, until the end of this year, with a reprofiling of debt payment thereafter to avoid an increase in monthly payments; and, (iv) a cap on the average annual percentage rate (APR) on new unsecured consumer credit at the central bank base rate (currently, 0.9 percent) plus 5 percent. On September 20, the government extended debt repayment moratorium by six months for select groups.

    Regarding macro-prudential measures, (i) the Foreign Exchange Coverage Ratio (FECR), which imposes a limit on the difference between forex-denominated assets and liabilities of credit institutions as a percent of total assets, was reduced from 15 to 10 percent; and (ii) the additional capital buffer requirement for systemically-important banks will be temporarily eliminated as of July 1. On September 8, regulatory forbearance for unmet reserve requirements was reversed.

  • The exchange rate has been adjusting flexibly.