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Government declares ‘energy emergency’

July 15th, 2022

A middle-of-the-road economic analyst thinks that the government decision to limit access to cheap, subsidized household energy will further increase the inflation rate and make a recession more likely.

On Wednesday, the government announced that Hungary needs to prepare for an energy emergency. As part of the emergency measures, energy price subsidies will be restricted. Household electricity and heating gas will be subsided up to the average consumption level. Families who use more than the average household will pay market prices which are 7 to 8 times higher than subsidized prices. Families with three or more children will get higher subsidized quotas.

On Portfolio, Gergely Csiki interprets the drastic cut of energy price subsidies as an admission that Hungary is facing an extreme challenge. The centrist economic analyst recalls that the government has announced huge spending cuts and tax hikes to stabilize the economy. The cut in energy subsidies indicates that the government is willing to abandon policies that were central to the it’s political message  – the so-called ‘rezsi-csökkentes’ or cut in utility prices, with which it won the last three elections. He predicts that higher energy prices will further increase inflation as well as the likelihood of a recession.