BUDAPEST (Reuters), – The Innovation and Technology Ministry of Hungary announced Wednesday that the key terms of a nearly 20% rise in the minimum wage and pay for skilled employees for 2022 have been reached by both the government and private sectors.

Pre-election measures taken by Prime Minister Viktor Orban to increase economic growth and consumer spending are part the wage hikes. This comes at a moment when there has been an inflation spike that has decreased some of the previous years’ steep wages gains.

Faced with the possibility of an election close at hand, Orban has lavished the electorate in cash and other goodies, such as a $2 Billion income tax rebate to families, a scrapping income tax for career starters, and pension bonus payments.

According to the government, the minimum monthly wage will be increased to 200,000 ints ($645.72), up from 167.400 forints at January. The minimum wage for skilled workers will also increase to 260,000 from 219,000.

The Innovation and Technology ministry stated in a statement that tax cuts of more than 660 billion forints per year can be used to compensate domestic employers and increase wages. It said that the wage agreement is expected to be in place by mid-February.

Takarekbank’s economists believe that the tax rebates and wage hikes could result in more than 10% growth in net real wages. In the wake of the coronavirus epidemic, employers are facing increasing labour shortages.

His top economic advisor has stated that Orban’s fiscal stimulation measures will equal about 15% of Gross Domestic Product in the fourth quarter of 2018 and the first three quarters of 2022.

Gyorgy Matolcsy is the central bank’s ally and has criticized the budget 2022 for inflating the economy and adding unneeded risks. The country has now exceeded its pre-pandemic output level.

($1 = 309.73 ints