Mihály Varga identified as the main economic policy tasks of the coming period issues such as the combating of the black economy, the boosting of employment and lending as well as the addressing of demographic challenges and introducing stimulus measures for would-be parents.
At a conference organized by business daily Napi Gazdaság the Minister for National Economy pointed out that the Government is aiming to steadily accelerate the pace of sustainable economic growth and to concurrently maintain fiscal rigour – that is, to keep the central government budget deficit below 3 percent of GDP for the whole year.
Mihály Varga said that the drafting of next year’s budget is under way and they are taking into consideration that global economic conditions will only slightly improve and in the European Union no marked growth is being expected, as the main drivers of expansion will rather be the United States and China.
Speaking in detail about economic policy tasks he said that over the past years the black economy has narrowed, thanks among others to on-line cash machines. He pointed out that there are over 170 thousand on-line cash machines in the country and the Government is expecting another “wave” of these as seasonal businesses will be connected to the system in November-December.
It is a great result, Mihály Varga stressed, that today the number of people in employment is above 4 million. Hungary is among the leaders regarding the expansion of employment within the Eu, but the number of those in employment is still below the figures registered in Hungary-sized countries such as Sweden, Portugal or the Czech Republic.
He reiterated that their goal is to keep jobs through contributions allowances of the Job Protection Action Plan and the Government looks upon public work schemes as transitory measures. It is important, he added, to provide these people with the option of returning to the labour market: currently 8 percent of public work employees find a job within the private sector.
In his presentation the Minister emphasised that there is no investment without lending and there are no new jobs without investment. He called attention to the fact that while lending by large international banks has dwindled since 2008, smaller banks, large Hungarian banks and savings-cooperatives have boosted their lending activities. “Apparently it does matter that there are Hungarian-owned banks in Hungary and not only the subsidiaries of banks with foreign ownership,” he stressed. He also added that the Government wants domestic SMEs to have more credit options. As a transitory measure, lending will be accelerated through state institutions, such as the Funding for Growth Scheme of the National Bank of Hungary, but the long-term goal is to boost lending by retail banks.
To this end, he pointed out, the Government has been engaged in regular talks with the Hungarian Banking Association and banks. The Government is expecting local governments to present economic development, investment and job creation schemes to which they will also provide help.
The Minister said that the expenditure side of the state budget must be gradually reduced to 45 percent of GDP, and the redistribution ratio must also be lowered. Until year-end, state debt must also be cut. In his words, the Government has to be flexible: in case of a favourable offer with low interest rates that enables the issuance of long-term securities, it has to be accepted.
Among the Government’s objectives the Minister mentioned that they want to increase the investment ratio to above 20 percent, which will be assisted by the restructuring of EU funding and the fact that 60 percent of funds made avaialable in the coming seven-year period will be spent directly on economic development.
Mihály Varga added that re-industrialization continues to be a pivotal element within the Government’s economic policy. The Government intends to attract jobs to Hungary through bolstering the health industry, electronics, logistics, food and vehicle manufacturing sectors as well as, within the latter, electromobility.
(Ministry for National Economy)
