Economic expansion may offset the shortfall of revenues stemming from lower payroll taxes, as the Government is expecting the rate of growth to exceed 3 percent next year, Minister for National Economy Mihály Varga said, at the annual hearing of the parliament’s economic committee. Raising the minimum wage will generate revenues of HUF 180bn, while the reduction of payroll taxes will cut them by HUF 410bn, he noted.

The combined effect of tax cuts and wage hikes will be a substantial amount of extra resources left in the economy, he said, and the Government expects that better economic performance will provide sufficient revenues for the budget, he added.

A modification of the 2017 Budget is currently not being planned; the issue may be raised at the end of the first three months of next year, he stressed. The Government’s fiscal deficit target of 3 percent of GDP is expected to be met this year, as this indicator showed a shortfall, according to ESA, of 0.7 percent in the first nine months of the year.

This year’s economic growth of 2-2.5 percent is the result of the agricultural sector’s good performance, a net wage increase of 7.6 percent, employment growth and concurrent record-low unemployment as well as subdued inflation, he said. The weaker performance of the industrial sector, which posted output growth of 1.5 percent in the first nine months of the year, was due to the conclusion of several large-scale, EU-funded projects.

Among this year’s achievements the Minister singled out the wage hike agreement with a time frame of six-years concluded last week, which was signed by each employee and employer organization that had participated in wage negotiations, and the reduction of corporate income tax rates to a flat rate of 9 percent.

(Ministry for National Economy)