Responses to economic challenges owing to the war in Ukraine cannot be the same as remedies for the Covid-related economic crisis, Péter Benő Banai, the state secretary for public finances, told a conference in Szeged on Thursday. Whereas after the epidemic Hungary’s economy rebounded faster than the EU average, the external challenges this time round such as the rise in gas prices are more acute, he said, adding that securing European Union funds would be “essential”. Numerous investments can be financed using EU monies without bumping up the budget deficit, he said. With runaway energy prices combined with a grave deterioration of the current account balance, EU funds are also needed for maintaining external financing capacity, he said. Hopefully, significant funds would arrive promptly on the back of an agreement with the EU, he added, noting that many investments are pre-financed using state funds. Banai said an active economic policy was needed to resolve current challenges. Government spending was severely cut back in the wake of the war, and public investments were the main casualties, he said. The cutbacks were designed in a way that would preserve budget stability while taking the current balance of payments into account, he said. The aim was to avoid suffocating growth while dampening inflation as much as possible, he added. Whereas as the withdrawal of state investments is helping to combat inflation, pessimistic sentiment has grown over the past six months ago, so economic policy cannot “lean back”, he argued. Energy prices have a massive bearing on the expenses of state institutions, and the state has undertaken the additional burden of subsidising household energy bills, he noted. Detailed budget data for the first eight months will be published on Friday, Banai noted. Whereas VAT is expected to come in 990 billion forints (EUR 2.15bn) higher than last year, interest financing “is a serious challenge”, he said, adding that inflation and energy prices had a severe bearing on both the real economy and the budget. Banai noted that many European countries have provided support to households and companies to offset the energy crisis, and the European Commission has also eased the rules on state subsidies. But the difficulty of finding resources to support the worst affected companies while reducing the deficit was a serious one, he added. The state secretary said it was unlikely that war-related sanctions would be ditched if, say, the war ended tomorrow. All in all, 2023 does not appear promising based on current information, Banai concluded.