(Adds context and details)
By Boldizsar Gyori
BUDAPEST, May 11 (Reuters) - Hungary's government
expects the economy to rebound next year, enabling it to reduce
its budget deficit to below 3% of GDP and possibly cut windfall
taxes on key sectors including banks, oil companies and
airlines, a government official said on Thursday.
The prime minister's chief of staff Gergely Gulyas also said
the government would extend a cap on mortgage and loan rates
beyond June 30 to help households and small businesses weather
high interest rates.
The government expects the economy to grow by 4% next
year, after expected growth of just 1% this year, and targets a
budget deficit of 2.9% of gross domestic product in 2024, down
from an expected 3.9% of GDP this year, Gulyas told a media
briefing.
It plans to maintain windfall taxes on key sectors next year
but the rate of tax could be lower than current levels, he said.
The cap on mortgage and loan rates will be reviewed once
inflation slows to single digits and the central bank's base
rate shrinks below 10% from 13% currently, he said.
"The current high market interest rates do not allow the
government to phase out the caps on loan rates," Gulyas said,
adding that this would cause "unbearable difficulties" for many
families.
Prime Minister Viktor Orban's government is facing economic
challenges as it battles Europe's highest inflation rate at 24%
and an economy that is in a technical recession. High interest
rates have effectively halted borrowing but analysts say the
central bank's room for manoeuvre for easing monetary policy is
still narrow.
Hungary late last year expanded its cap on mortgage rates to
include variable-rate loans to small- and medium-sized
businesses, to ease the debt service burden on the sector.
Although the country's current account balance has
improved this year, Hungary has still not received EU funds,
which were suspended due to the government's rule of law dispute
with the European Commission, putting additional strain on the
budget.
Gulyas said parliament was expected to vote on the 2024
budget bill in early June.
(Reporting by Boldizsar Gyori and Krisztina Than; Editing by
Susan Fenton)
