Hungary's government will phase out windfall taxes on telecommunication and pharmaceutical companies from 2025, its, economy minister Marton Nagy was quoted as saying by local broadcaster ATV on Wednesday.

Earlier this week the government announced tax hikes on banks, and said that a windfall tax on banks and retailers will be extended beyond 2024, but decided to scrap the windfall taxes on airlines.

"The windfall tax on banks is justified," Nagy said at a press briefing on Wednesday according to broadcaster ATV.

Prime Minister Viktor Orban's government imposed windfall taxes on a range of sectors including banks, insurers, energy and airlines, telecommunication and pharmaceutical companies in 2022, as it tried to plug holes in the budget.

The government said at the time that it aimed to collect 800 billion forints ($2.20 billion) in taxes on "extra profits" earned by firms, hitting Budapest stocks and rattling investors.

Despite the measures, Hungary's annual budget deficit averaged at 7% since 2020, paired with inflation peaking above 25% in the first quarter of 2023, only returning to single-digits in last September.

High interest rates to reign in on inflation came at the cost of reduced lending and household consumption, impeding Hungary's economic recovery and drying up consumption-based tax revenues for state coffers. ($1 = 363.6800 forints)

(Reporting by Boldizsar Gyori, Editing by Louise Heavens)