Hungary is getting on a growth path that allows of expansion without increasing state debt, Minister for National Economy Mihály Varga told public broadcaster M1 last week.

Commenting on the Prime Minister’s state of the nation speech, Mihály Varga said that while economic growth reached 3.5 percent, Hungary’s central government budget deficit could still be kept below 3 percent of GDP.

He stressed that last year the volume of state and private sector investment totalled HUF 5200bn, while -- due to lower public utility prices and the increase of wages in real terms -- household consumption has also been driving growth. The export outlook is also promising: the volume of exports this year is expected to total more than EUR 100bn, whereas European markets are still stagnating. Thus, he explained, several growth factors are in place, but the economy is also set to benefit from EU funding of HUF 2000 per year.

In the opinion of the Minister, in the coming years the economic structure must be altered in a way that would facilitate strong expansion even without the backing of EU resources. It has been a great achievement, he pointed out, that in terms of economic growth Hungary has turned from a tail-ender into a top performer, as the country topped the EU ranking in two quarters of last year.

Speaking about sectoral taxes he emphasised that these are part of the taxation system and fair burden-sharing. Accordingly, sectors that managed to stay profitable even during the years of crisis have to bear a larger share of burden. However, in case banks boost lending and thus the economy revives, the Government of Hungary will be in a position facilitating the adjustment of the bank tax.

As far as social policy is concerned, the main objective is to stabilize the middle class and provide assistance for people who work 8, 10 or even 12 hours wishing to advance on the social ladder.

With regard to troubled brokerage firm Buda-Cash Group he said that in order to reveal the true state of affairs at other brokerages and financial institutions first, the supervisory system must be modified and second, managers must be convinced that they are better off when instead of trying to cover up they request an investigation against themselves. Last week, he said, the Ministry started to work on a package of proposals which would recommend revisions every three years instead of the current five years. In case the proposal if approved by the National Bank of Hungary, it can be submitted to Parliament and adopted as part of package of consumer protection measures, he stressed.

Currently, the amount of losses caused for the state is being assessed, he added. 84 local governments and 52 minority local governments held accounts at the banks at issue. Local governments, the accounts of which have been blocked at Buda-Cash Group, are now allowed to open a new account where the State Treasury will transfer wages and pensions. Taxpayers with accounts frozen at these institutions are also permitted by the National Taxation Office to request a later deadline for the transfer of tax liabilities.

The joint working group set up by the Ministry of Interior and the Ministry for National Economy to evaluate the effects of the disturbances caused by the Buda-Cash affair is to submit a report soon.

(Ministry for National Economy)