Fiscal processes were favourable this year, and the budget deficit may even be 2.4 percent of GDP, Minister for National Economy Mihály Varga said at a hearing by the parliament’s economic committee.
Over the past years the country has successfully conducted economic and consolidation processes, thanks to which Hungary has exited the excessive deficit procedure and economic growth reached 3.7 percent in 2014, and it is expected to be some 3 percent this year. These figures are well above the average growth rate of the EU, he said.
The Minister pointed out that the dynamic growth of the tourism sector has significantly contributed to Hungary’s economic growth. Export volume growth in the initial ten months of the year shows that the Hungarian economy has been closing the gap with the economy of the EU. The sector plays a key economic role, as it generates 9 percent of GDP and employs 11 percent of total workforce.
In light of data from the period January-October 2015, the foreign trade sector posted a surplus of some EUR 6.8bn, thus the full-year surplus may even reach EUR 8bn, Mihály Varga added.
Compared to 2010, the number of people in employment has risen by 550 thousand, to a total of 4.3 million. As the Minister stressed, while in 2010 the country was viewed as another Greece, Hungary’s economic growth has recently exceeded the EU’s averages and in terms of economic growth last year Hungary was among the best of the EU.
Over the past years, the government debt-to-GDP ratio had also fallen gradually and it reached 76.2 percent last year, while further reduction is expected for this year. As a positive tendency, the share of forex debt within the total amount of general government debt has also been declining: it fell from 45 percent four years ago to the current 36-37 percent. This trend keeps mitigating the country’s vulnerability, he stated. Moreover, more and more Hungarian retail investors purchase Hungarian government securities.
Speaking of future prospects, the Minister said that the global economy is set to slow down; therefore the Hungarian economy is expected to face an increasing number of challenges. As the Fed is to raise interest rates, more funds may leave the emerging markets. Bank files show that EUR 15-20bn has hitherto been withdrawn from Central Europe. Other growth risks include the deceleration of China’s economy and the European car industry scandal. Welfare expenditures within the EU will increase due to the flow of migrants. Out of Hungary’s budget, HUF 44bn has been disbursed for migration-related crisis management, Mihály Varga said.
The Government plans to launch stimulus packages in four fields, for example through a programme designed to facilitate home building. The timely utilization of EU funding is another key factor; therefore all the calls for tenders for the new EU fiscal period are to be published until the end of 2017.
The Government also plans to make progress on the labour market. Along with the extension of the public work programme, educational-vocational training schemes designed to assist those leaving the public work programme will be accelerated.
The transformation of the Hungarian Tax and Customs Administration (NAV), he noted, is in line with trends prevalent in OECD countries. As a result of the reform, the tax authority becomes part of the Ministry for National Economy. Thanks to this new structure, bureaucracy is expected to become simpler and faster.
(Ministry for National Economy)
