BUDAPEST (Reuters) -Hungarian Prime Minister Viktor Orban announced on Saturday a new cheap loan programme for small and medium businesses at a fixed 3% interest rate, set to launch on Monday, as he seeks to fend off a surging opposition challenge.
In power since 2010, the nationalist leader faces what analysts say could be his toughest election next year, with the economy stagnating and stubborn inflation preventing interest rate cuts by the central bank.
The new loans follow a subsidised home loan programme for first-time buyers introduced last month at below half the market rate. The central bank’s benchmark rate stands at 6.5%.
TAX CUTS FOR BUSINESSES
“The new loan (for businesses) will be available … with a fixed 3% interest rate, free use, and a cap of 150 million forints ($454,250),” Orban told a briefing. He also signalled potential employment-related tax cuts for businesses, but did not give details.
The National Bank of Hungary said last week that government measures, such as public sector wage hikes, housing support for civil servants and a subsidised mortgage scheme, could boost households’ net income by 1.5% of economic output in 2026.
It also said the cheap housing loans would boost consumption growth and trigger a surge in lending. Housing prices have already risen sharply in the past weeks.
However, economists warn the pre-election spending poses fiscal risks, with some concerned that weak growth could prompt further largesse.
OTP Bank analysts said in a note this week that the economy would grow just 0.6% this year, which could pick up to around 3% next year driven primarily by consumption, fuelled by the fiscal stimulus ahead of the election.
But they said this could be temporary, and then the budget deficit – which could rise above 5% of economic output in 2026 – would have to be reined in.
($1 = 330.2100 forints)
(Reporting by Krisztina Than. Editing by Mark Potter)
