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

BUDAPEST, Oct 22 (Reuters) – Hungary will expand its existing mortgage rate cap from mid-November to include floating-rate loans to small and medium-sized businesses to avoid a recession, Economic Development Minister Marton Nagy said on Oct. 22. . Saturday.

With inflation above 20% in September and still rising and the economy slowing, Prime Minister Victor Orbán’s government faces the challenge of curbing price growth while trying to avoid a recession in 2023. It has capped the price of fuel and basic food and mortgage rates. There is also a cap on the average-using household’s energy bill.

On Saturday, it announced subsidies worth 150 billion forints ($362 million) to big companies to help with investments in energy efficiency, and expanded a scheme to cap lending rates at the cost of commercial banks.

Following the central bank’s emergency rate hike on October 14, commercial lending rates will be capped at the three-month interbank offered rate on June 28, or 7.77%, compared with the current rate of 16.69%, Nagy said. The cap, which is valid until July 1, 2023, is similar to the existing cap on household mortgage rates, Najib said.

Najib said the stock of floating-rate loans held by some 60,000 small companies was close to 2 trillion forints, and the measure was aimed at preventing those companies from paying 20 percent or more on their loans.

“We want to avoid a recession next year and we have a chance of 1 percent growth,” Najib told a briefing.

“With this lending cap, we want to prevent the corporate sector from being hit again by a surge in repayments.”

In May, the government announced a windfall profits tax worth 800 billion forints on so-called “extra profits” earned by banks, energy companies and other companies to plug a budget gap, hitting the Budapest stock market and rattling investors.

(1 USD = 413.9900 Forints)

Reporting by Krisztina Than; Editing by Kirsten Donovan

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