Economy

Stocksak: Hungary extends loan rate cap scheme for small businesses as recession looms


© Stocksak. FILEPHOTO: Marton Nagy, when he was the Deputy Governor of National Bank of Hungary attended an interview in Budapest, Hungary with Stocksak on May 23, 2017. REUTERS/Krisztina Than

By Krisztina Than

BUDAPEST, Stocksak – Hungary will raise its existing cap for mortgage rates in November to include variable-rate loans to small and medium-sized business. This is in an effort to avoid recession, Marton Nagy Minister of Economic Development stated on Saturday.

Prime Minister Viktor Orban’s government has to deal with rising inflation and slowing economic growth. It has already capped fuel prices, basic foodtuffs, and mortgage rates. For households with average usage, energy bills have been capped.

It announced subsidies in the amount of 150 billion forints ($362million) for large businesses to support energy efficiency investments. In addition, it expanded its scheme of capped interest rates for loans with commercial lenders.

Nagy stated that rates for business loans will be limited to the interbank rate of 7.77% on June 28. This was in contrast to the current rate (16.69%), which was raised by the central bank on October 14. Nagy stated that the cap is in place until July 1, 2023. It is similar to the existing cap for household mortgage rates.

Nagy stated that the variable-rate loan stock was close to 2 trillion forints and was held by approximately 60,000 small businesses. The measure was intended to prevent these businesses from paying 20% or more on their loans.

Nagy stated that he would like to see the economy avoid a recession next year and that there is every chance of 1% growth.

“With this loan limit, we want prevent another shock to corporate sector resulting from a rise in their repayments.”

In May, the government announced windfall taxes in the amount of 800 billion forints on “extra profits” that banks, energy companies, and other firms earned to close a budget deficit. This hit Budapest stocks, and rattled investors.

($1 = 413.9900 forints)

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