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

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BUDAPEST, Oct 22 (Reuters) – Hungary will extend its current cap on mortgage rates from mid-November to include variable-rate loans to small and medium-sized businesses to avoid recession, the development minister said. economy Marton Nagy. Saturday.

As inflation topped 20% in September and continues to rise, and the economy slows, Prime Minister Viktor Orban’s government faces the challenge of reining in price growth while trying to avoid a recession in 2023. It has already capped fuel and basic food prices and mortgage rates. Energy bills are also capped for households with average consumption.

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

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

Nagy said the stock of floating rate loans amounted to nearly 2 trillion forints held by around 60,000 small businesses, and the measure was aimed at preventing those businesses from paying rates of 20% or more on their loans.

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

“With this lending cap, we want to avoid another shock to the corporate sector resulting from an increase in their repayments.”

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

($1 = 413.9900 forints)

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Reporting by Krisztina Than; Editing by Kirsten Donovan

Our standards: The Thomson Reuters Trust Principles.

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