Hungary's debt problem. Hungarians 2nd largest group of foreign workers in Austria
Hungary’s debt problem: how deep is it?
Not very deep. Hungary’s gross debt-to-gdp is below EU average:
Hungary has been adding to the debt level by running massive budget deficits for years:
This has lead to a re-accumulation of debt-to-GDP:
Although from a very high level (18%), the interest rate is being brought down by the Central Bank. The EURHUF exchange rate has weakened somewhat as a consequence, but not dangerously. By the middle of 2024 an interest rate of around 7% is realistic.
Such high interest rate levels of course make interest payments a high burden, in fact the highest in the EU in 2023.
This does not look good at first sight, but we have to look at its internal distribution to fully understand the picture. The increase is mostly due to the enormous growth of inflation indexed treasury bills, bought mostly by domestic households.
This is not a terrible thing, as most of these have been bought by households domestically, which means they constitute domestic wealth, and have helped even out the period of inflation (for the top3 income deciles who can afford to buy them). When the national budget pays interest, it pays them mostly to domestic households, which will spend most of it domestically, constituting increased domestic demand. Or they will continue to save it, increasing domestic household wealth. So the increase in interest payments isn’t as worrisome as it seems at first sight.
Without interest payments, the primary balance of the budget is just about at the breakeven point:
This is after a few years of massive primary negatives, brought about by covid (2020) and election spending (2022).
Hungarian second largest group of foreign workers in Austria
No surprises here, as Austrian wages are almost four times Hungarian wages: