Salem Radio Network News Sunday, November 27, 2022

Business

Hungary extends loan rate cap scheme to small businesses as recession looms

By Krisztina Than

BUDAPEST (Reuters) -Hungary will expand its existing cap on mortgage rates from mid-November to include variable-rate loans to small- and medium-sized businesses in a bid to avoid recession, Minister for Economic Development Marton Nagy said on Saturday.

With inflation topping 20% in September and still rising, and the economy slowing, Prime Minister Viktor Orban’s government faces the challenge of curbing price growth while trying to stave off a recession in 2023. It has already capped the prices of fuel and basic foodstuffs and mortgage rates. Energy bills are also capped for average-use households.

On Saturday it announced subsidies worth 150 billion forints ($362 million) for large companies to help investments that improve energy efficiency, and expanded its scheme of capped interest rates on loans with commercial banks bearing the costs.

Nagy said rates on business loans will be capped at the 3-month interbank rate of June 28, which was 7.77% as opposed to the current rate of 16.69%, after an emergency rate hike by the central bank on Oct 14. The cap is effective until July 1, 2023, similar to the existing cap on household mortgage rates, Nagy said.

Nagy said the stock of variable-rate loans amounted to close to 2 trillion forints held by about 60,000 small firms, and the measure aimed to avoid these businesses paying 20% or higher rates on their loans.

“We would like to avoid the economy going into recession next year and we have every chance to have 1% growth,” Nagy told a briefing.

“With this loan cap we want to prevent yet another shock to the corporate sector stemming from a surge in their repayments.”

In May the government announced windfall taxes worth 800 billion forints on what it called “extra profits” earned by banks, energy companies and other firms to plug a budget gap, hitting Budapest stocks and rattling investors.

($1 = 413.9900 forints)

(Reporting by Krisztina Than; Editing by Kirsten Donovan)

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