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Analysis: As polls tighten, Hungary's Orban steps up pre-election spending

[February 04, 2021] By Gergely Szakacs

BUDAPEST (Reuters) - Ahead of an election next year, Hungarian Prime Minister Viktor Orban is spending money on key groups of voters as opinion polls show a neck-and-neck race with an opposition united against him for the first time.

The right-wing premier, in power since 2010, is under pressure to reopen the economy after a pandemic-driven crash that sent Hungary into its worst recession since the global financial crisis, ending seven years of steady growth.

A tally by news website hvg.hu showed about a quarter of the spending channelled via a $12 billion COVID recovery fund last year was linked to the pandemic as Orban spent on other items, including support for ethnic Hungarians living elsewhere in central Europe, who backed him in previous elections.

Orban is also handing out extra payments for pensioners from February, plans to scrap income tax for younger people from 2022 and is offering grants to families to renovate their homes - measures worth about 1% of gross domestic product (GDP) combined, or about $2 billion.

His government is also extending a generous family benefit regime that now costs nearly 5% of GDP per year and represents Orban's most popular policy among undecided voters, according to a 2020 survey by think tank Policy Solutions.

Orban's minister in charge of family policy, Katalin Novak, told Reuters that the latest measures were an extension of the governing Fidesz party's decade-old policies rather than electioneering ahead of a national vote due in just over a year.

"We are in a fortunate situation as Hungarian people are family-centric, therefore, they assess measures to help families or young people starting a family positively," said Novak, one of Orban's deputies at the helm of Fidesz.

"We are ready to continue on this path and pledge that we will not cut back on family benefits. On the contrary, we will continuously expand them."

Orban, 57, has been criticised abroad for anti-immigration rhetoric and reforms that the European Union says amount to authoritarianism, which he denies. But he has been popular at home, winning three straight terms to become Hungary's longest-serving post-communist leader.

Peter Virovacz, an economist at ING in Budapest, said the government's scope to take measures that help its election prospects has been vastly increased by the pandemic, which has eroded budget discipline across Europe.

"The execution of an election-style budget is helped by the fact that the 2020 shortfall could be blamed on COVID, which meant there was nothing the budget could not take, and this had opened up the floodgates," Virovacz said.

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Hungarian Prime Minister Viktor Orban holds an international news conference in Budapest, Hungary, January 9, 2020. REUTERS/Tamas Kaszas

In less than a year, Hungary has gone from targeting a balanced budget in the foreseeable future to a deficit worth around 9% of GDP.

COPY-PASTE FROM WARSAW

With the proposed income tax cut for people under 25, Orban is taking a page out of the playbook of his conservative Polish ally, Jaroslaw Kaczynski, whose PiS party launched a similar measure ahead of the 2019 national election.

PiS won fewer votes among people aged 18-29 than in other age groups, according to an Ipsos exit poll. A recent Hungarian survey showed a similar pattern among younger voters.

"This is a copy-paste proposal," said Andras Biro-Nagy at Policy Solutions. "It is logical that they are trying to do something as this is Fidesz's weakest demographic. They are trying to avoid losing this age group at the next election."

A December survey by Hungarian think tank Zavecz Research showed support for Fidesz at 33.1% in the 18-29 demographic, the lowest among all age groups and just below support for the joint opposition party list.

At the same time, the level of undecided voters was by far the highest in the same age group. The united opposition held a four-point lead over Fidesz among all voters, reflecting a tightening race seen in other polls.

Orban is also reviving a 13th month pension in a symbolic move as the payment was scrapped under a leftist government as part of an International Monetary Fund-led austerity programme that rescued Hungary from the brink of financial collapse.

The prime minister argues that any return of his leftist opponents to power would lead to similar recklessness in public finances, an area where Fidesz had a strong record prior to the pandemic.

Despite catching up with Fidesz at the polls, the opposition still faces hurdles, including agreeing on a joint candidate list and presenting a viable challenger to the combative Orban.

"Fidesz has been weakened by the pandemic, the government faces a highly unpredictable economic and public health environment in 2021 and polls show that a united opposition could become a serious headache for the ruling party," said Andrius Tursa, a political analyst at Teneo Intelligence.

(Reporting by Gergely Szakacs; Additional reporting by Alan Charlish in Warsaw; Editing by Giles Elgood)

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