Next year will bring a number of complications for the Hungarian government, both at home and abroad. Budapest is trying to reduce its fiscal deficit and, in pursuit of this goal, will continue to apply special taxes to some sectors of the economy, including supermarkets and tobacco companies, while making spending cuts. These changes will lead to further protests, though they will not threaten the Orban government's hold on power.
Despite protests, the Hungarian Parliament approved a series of controversial measures Dec. 15. The reason was simple: Budapest needs to increase its available funds to keep the deficit under control. While the nation's budget deficit is still below the ceiling of 3 percent of GDP requested by the European Union, it has risen from 2.4 percent in 2013 to an estimated 2.9 percent in 2014. Next year, Budapest will try to reduce its deficit. The 2015 budget is based on a 2 percent increase in state revenue and only a 0.03 percent increase in state expenditures.
In addition, the Hungarian government predicts economic growth will slow down in 2015. Budapest expects Hungary's GDP to grow by only 2.5 percent next year, down from 3.3 percent in 2014. Several independent think thanks and research groups believe the country's economic performance will be even lower.
The measures planned for 2015 will hurt some more than others. The Hungarian Parliament has introduced higher taxes on media and energy-trading companies as well as investment funds. Foreign-owned retail chains, however, will be among those harmed the most. Tobacco manufacturers and traders will also see negative effects as a result of the new laws. Furthermore, Hungary's municipalities are still dealing with more than $4 billion in debt despite a relief program recently approved by Budapest. As a result, the national government will push local governments to introduce their own taxes in 2015.
