Is the Hungarian economy heading towards a fallback? What could be the reason behind the Hungarian government calculating with a 425/EUR exchange rate by this October? That is what Bertalan Tóth, a Socialist MP, asked from the Orbán administration, following some interesting data the government published.
According to index.hu, Mr Tóth sent multiple questions to Mihály Varga, Hungary’s finance minister. The parliament group leader wrote that a government bill implied the administration calculated with 425/EUR exchange rate by this October.
The bill concerned is the government’s new tax regulation, including, for example, the excess profit taxes of the airlines and the modification of several other tax forms. Based on the bill, from 1 January, the excise tax on fuel would increase significantly by HUF 32.55/l. As a result, fuel prices may soar by HUF 41 next year because of the modification.
The minister said the “correction” is needed because of the EU. That is how Hungary can fulfil Brussels’ minimum tax rule on fuels. The Hungarian government never uses the term ‘tax increase’ because they claim only the previous leftist administrations raised taxes, the Fidesz governments only decrease them.
EUR/HUF exhange rate affects fuel prices
However, Mr Tóth said the government’s increase plan is too much. The HUF 32.55 rise follows a 425/EUR exchange rate. If the rate was lower, such a steep increase would not be needed. Tóth implies that, provided the government does not modify the fuel tax increase, that would mean they expect a 425/EUR exchange rate by 1 October.
The government’s calculation is quite interesting, to say the least. The forint has been strengthening lately thanks to the high base interest rate introduced by the Hungarian National Bank last autumn. Furthermore, some good news came from Brussels months ago regarding the opening of billions of RRF fund euros for the Orbán administration. Though that does not mean Hungary can gain access to the entire sum the economy badly needs, it might help a lot.
As we wrote yesterday, the forint reached a new record by strengthening to 367.69/EUR at 5.40 PM. Now, it stands at 368.23/EUR.