April 25, 2017 / 8:15 AM / 7 months ago

Hungary flags pre-election bonus for pensioners - newspaper

BUDAPEST (Reuters) - Hungarian pensioners could receive a special bonus at the end of this year if economic growth exceeds 3.5 percent and the budget deficit remains under control, Economy Minister Mihaly Varga was quoted as saying on Tuesday.

Mihaly Varga, Hungary's Minister for National Economy, attends the Asian Financial Forum in Hong Kong, China January 16, 2017. REUTERS/Bobby Yip/Files

There are close to 3 million pensioners in Hungary, about a third of the population, and an extra payout could be a vote-winner for Prime Minister Viktor Orban’s rightwing government, which leads in opinion polls and faces an election in April 2018.

The government estimates economic growth of 4.1 percent this year, rising to 4.3 percent in 2018, bolstered by massive fiscal stimulus measures and higher consumption.

Hungary spends about 10 percent of economic output on pensions, and any hikes can significantly affect the fiscal balance. Orban has already paid a one-off bonus to pensioners last year.

Varga told the pro-government daily Magyar Idok that this could be followed by another such payment linked to strong economic growth.

He said the budget deficit would have to come in at the government’s target of 2.4 percent of economic output this year. He did not elaborate on how much the measure would cost.

The minister said pensioners would also be compensated for higher-than-expected 2017 inflation, which was expected to exceed the government’s 1.6 percent forecast. Hungarian pensions are adjusted to the expected pace of price growth each year.

The government will make a decision about the inflation adjustment in November, Varga said.

Late last year Orban’s government also agreed with private sector employers on big hikes in the minimum wage to combat a labour shortage and stem a flow of workers to western Europe in search of higher living standards.

Orban has faced weeks of protests in Budapest for a more democratic government, triggered by a law which hit a top university founded in Budapest by billionaire financier and philanthropist George Soros.

Reporting by Gergely Szakacs; Editing by Mark Trevelyan

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