The conversion of forex loans into forint denominated ones shall start in spring next year, after the parliament has adopted related regulations, Minister for National Economy Mihály Varga said at the 52nd Congress of the Hungarian Economic Association in Nyíregyháza.
As the Minister pointed out, the regulatory framework for the settlement of unilateral modification of contracts is being prepared, and this – in light of estimates – is believed to cost some EUR 3bn for the banks. The Minister added that with this step a major risk factor will be removed from the Hungarian banking system. Mihály Varga stressed that the Government is also evaluating a revision of bank sector taxes. He underlined that the phasing out of forex loans does not mean that all foreign currency denominated loans will vanish, but forex mortgages shall be taken out of the system.
Mihály Varga emphasised the importance of sustainable economic growth, of keeping the general government budget deficit below 3 percent of GDP and cutting state debt. Within the latter goal, it is especially important to reduce foreign currency debt, he said. Speaking about the latest GDP growth figure of 3.9 percent for the second quarter of 2014, the Minister said that this good result is the consequence of several measures implemented thus far and the economic policy they have been pursuing must be continued. He pointed out that through the optimal utilization of EU and domestic funding more investment projects have to be financed, the volume of FDI has to be increased and investment projects securing long-term growth have to be continued and completed, but without endangering fiscal balance.
With regard to the cutting of forex debt the Minister said that the Government does not plan to issue foreign currency denominated government securities either this year or next. The year of 2015 will be a better one from the aspect of debt financing, he said, as the country has to repay altogether only some EUR 2bn. Among the main economic objectives of the Government the Minister mentioned that the expenditure side of the state budget shall be cut to 45 percent of GDP, the number of people in employment and the number of jobs shall continue to rise and the investment rate shall be increased to above 20 percent through a consistent reindustrialization policy. This can ensure stable and long-term economic growth via sectors such vehicle manufacturing, electro-mobility or energy-related investment projects, he stressed.
The Minister also said the Government wants its strategic partners to reinvest in Hungary the highest possible share of their profits generated here. To this end, the Government can even make individual decisions and introduce some incentive measures.
Mihály Varga also noted that earlier this year a USD 3bn bond issuance was six-times oversubscribed and this he considers being the best possible credit rating. He added that as traditional credit rating is important from the aspect of reducing country risk perception, the Government is aiming to persuade credit rating agencies to upgrade the country.
State Secretary of the Hungarian Ministry of Foreign Affairs and Trade Péter Szijjártó was also present at the event.
(Ministry for National Economy)
