UPDATE 1-Hungary in talks with banks on loan moratorium extension into 2021, PM's aide says

(Adds details, background)

BUDAPEST, July 30 (Reuters) – Hungary’s government is in talks with local banks about partially extending into 2021 a loan repayment moratorium for companies, Prime Minister Viktor Orban’s chief of staff, Gergely Gulyas, said on Thursday.

In March, Orban’s government imposed a blanket moratorium on loan repayments for all companies and private borrowers until the end of this year. It was among the first measures to limit the economic fallout from the spread of coronavirus.

The measure has deferred the repayments of 3.6 trillion forints ($12.25 billion) until the end of this year, based on central bank figures.

Gulyas told a news briefing that Budapest maintained its forecast for a 3% recession this year, although Finance Minister Mihaly Varga warned last week that the Hungarian economy could shrink by as much as 5% because of the coronavirus.

“We are in talks with the Banking Association to explore whether it is possible, if not generally, but to provide some additional benefits or a partial moratorium for companies from next year,” Gulyas told a press briefing.

A spokeswoman for the Hungarian Banking Association declined immediate comment.

Central European stocks fell on Thursday, tracking a retreat in European shares, as weaker-than-expected German gross domestic product data revealed the scale of economic havoc wrought by the COVID-19 pandemic.

OTP Bank, the largest lender in Hungary, has said the loan repayment moratorium could reduce its pre-tax profit by 26 billion forints this year.

Other major banks in Hungary include Austrian Erste Group Bank and Raiffeisen, Italian UniCredit and Intesa SanPaolo as well as Belgian KBC .

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