BUDAPEST, Dec 15 (Reuters) – Hungarian Prime Minister Viktor Orban’s government and private- sector employers have agreed on a 16% minimum wage increase for next year, the government said, amid a surge in inflation that is expected to reach around 25% by the end of the year.
Orban’s government announced the deal on its Facebook page on Thursday, saying the minimum wage would rise to 232,000 forints ($605.46) a month from January, while the minimum wage for skilled workers would rise by 14% to 296,400 forints.
The 59-year-old nationalist faces the biggest economic challenge of his 12-year rule as inflation is on track to peak at around 27% in the first quarter, interest rates are the highest in Central Europe, and the economy is slowing sharply.
However, as elsewhere in the region, the labour market has remained resilient to the slowdown engulfing much of Europe, as a chronic shortage of skilled workers has bolstered the bargaining power of employees amid high turnover.
A big wage hike at the start of 2022 before a national election has cascaded into higher wage brackets, lifting private-sector wage growth near an annual 17% by September, aggravating demand-side pressures on inflation.
Poland will also raise the minimum wage sharply next year in the run-up to a parliamentary election that the ruling party will face amid a cost-of-living crisis, with Polish inflation also in the double digits and still rising.
Hungarian employers’ group VOSZ said the sides also agreed to review the wage deal if 2023 inflation reaches 18% and Hungary manages to avoid recession.
Earlier on Thursday, Orban’s economic development minister said the government expects GDP growth to decline to 1.5% in 2023 from an estimated 5% this year.
($1 = 383.18 forints)
(Reporting by Gergely Szakacs in BudapestEditing by Andrew Heavens and Matthew Lewis)