Hungary to extend COVID-19 loan moratorium to end-August - PM aide

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FILE PHOTO: Gergely Gulyas, Hungarian Prime Minister Viktor Orban’s chief of staff speaks during an interview in his office in Budapest

BUDAPEST (Reuters) - Hungary has decided to extend a COVID-19 loan repayment moratorium until the end of August, a top government official said on Thursday, shunning calls from local banks to narrow down the scope of those eligible.

Hungary's economy has gone into free fall since the start of the coronavirus pandemic, contracting by more than 13% in the second quarter of 2020 and more than 5% in the year as a whole.

The moratorium, which was automatic unless customers asked to keep paying instalments, was initially put in place for six months and then extended by another six months until the end of June.

As the economy expanded by a better-than-expected 1.9% quarter-on-quarter in the first three months of 2021, however, Hungary's banks and the central bank have called for a narrower solution to help only the most vulnerable borrowers.

"The government cannot support banks' position in this debate. We will definitely extend the moratorium in its current form until August 31," Gergely Gulyas, Prime Minister Viktor Orban's chief of staff, told a weekly briefing.

Orban's right-wing Fidesz party, which faces a closely contested election next April, has used one of Europe's fastest vaccination campaigns to shed much of health and safety restrictions and reopen the economy.

Budapest is also looking for a solution to allow those wishing to benefit from the moratorium beyond August, Gulyas said, adding that it could change into an opt-in scheme for both companies and retail borrowers.

"We know this requires a large sacrifice from banks. However, to restart the economy it is essential that private borrowers, families and companies be in a good financial shape," Gulyas said.

At 0924 GMT, shares in Hungary's OTP Bank traded 1% higher at 14,950 forints ($52.09) on the Budapest Stock Exchange, slightly outperforming the blue chip index, which gained 0.7%.($1 = 287.01 forints)

(Reporting by Gergely Szakacs and Anita Komuves, Editing by Gabriela Baczynska)

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