Hungary's Orban pledges to preserve economic stability as crisis looms

© Reuters. Hungarian Prime Minister Viktor Orban attends the inauguration of Mindszentyneum during the celebrations of the 66th anniversary of the Hungarian Uprising of 1956, in Zalaegerszeg, Hungary, October 23, 2022. REUTERS/Bernadett Szabo

BUDAPEST (Reuters) – Hungary’s government will preserve economic stability next year and maintain a cap on household energy bills even as the European Union slides into an “economic crisis”, nationalist Prime Minister Viktor Orban said on Sunday.

As the country marked the anniversary of a 1956 uprising against Soviet rule, Orban, who was reelected for a fourth consecutive term in April elections, said next year would pose several challenges with the war in neighbouring Ukraine.

“A war in the east, and an economic crisis in the West,” Orban told supporters in Zalaegerszeg, about 200 km (124 miles)west of Budapest, adding that there was “financial crisis and economic downturn in the EU”.

In Budapest, teachers and students were due to stage a protest against the government later in the day.

“In 1956 we learnt that unity is needed in difficult times … we will preserve economic stability, everyone will have a job, we can defend the scheme of caps on energy bills, and families will not be left on their own.”

Caps on gas and electricity bills have been a key plank of Orban’s policies, but the costs of the scheme surged this year due to soaring energy prices, putting a huge burden on the state budget. The government was forced to scrap the cap for higher-usage households from Aug. 1.

The government is due to discuss changes to the 2023 budget in December.

The budget, approved in July, forecast economic growth at 4.1% next year while inflation was seen at 5.2% — forecasts since rendered obsolete by the surge in prices into double-digits. Headline inflation topped 20% in September and is still rising, while growth is expected to slow to 1% next year.

Hungary, which still imports most of its gas and oil from Russia, has seen soaring energy prices widening its trade gap and current account deficit, which the central bank says could reach almost 8% of GDP this year. The forint currency plunged to record lows versus both the euro and the dollar earlier this month, forcing the central bank to ramp up interest rates in an emergency move on Oct. 14.