In the next one-and-a-half to two years, the Hungarian economy is set to remain on the existing growth path, with 2.8-2.9 percent GDP growth projected for this year, Minister for National Economy Mihály Varga said at a conference organized by the Confederation of Hungarian Employers and Industrialists in Budapest.
As the Minister emphasised, it is not only the Government stating that it is not unrealistic to expect GDP growth of about 3 percent next year. More and more experts and think tanks – including institutions that are critical of the Government – are naming potentially positive growth factors and thus “there is a good chance that growth prognoses will be revised upward”, he added.
Mihály Varga pointed out that the new EU development period of 2014-2020 “is an effective tool for maintaining momentum behind economic expansion”. He stressed that while in 2007-2013 only 16 percent of EU funding was disbursed for economic development, in the current period it will be 60 percent.
In his presentation the Minister said “it is not the time yet to relax satisfied, but Hungary is becoming a country that can stand as a good example and not as a bad one.” Hungary has come a long way since 2010, when it was in the same league with Greece, when it was thought of as a country which requires external assistance.
The economic situation was deteriorating, unemployment hit 12 percent and general government debt was on the rise. Today, it is worth taking a look on the yields of 3-year Greek and Hungarian government bonds to see the difference between the two countries.
He also highlighted the fact that the 3.6 percent GDP growth figure in 2014 was the second highest within the EU, following Ireland. As he explained, growth has been underpinned by EU funding, consumption and investment growth – which was in excess of 21 percent – as well as by exports.
Industrial output and employment also improved, while general government debt was kept firmly below 3 percent. Mihály Varga stated that bank lending must pick up in order to sustain economic growth and the lowering of the bank tax, which was announced by Prime Minister Viktor Orbán in February, will contribute to this process.
The Minister said that the Government is set to introduce a new, consumer-friendly taxation system, effective as of 1 January 2015. “The framework will be readjusted and the attitude of the tax authority will be changed accordingly”, he stressed. “We expect the NAV (National Tax and Customs Administration) to bolster and not to slow down economic growth and to assist economic operators.” The current tax inspection philosophy is based on the principle that all taxpayers are fraudsters.
The system is too rigid and the tax authority has no manoeuvring room. Instead of this, good taxpayers must be distinguished from bad ones, and the authority “must adopt an unbiased attitude towards taxpayers,” as he put it. By 2017, NAV is expected to be prepared to make the tax returns for the majority of private persons in Hungary.
Finally, the Minister said the new electronic trade and transport control system (ekáer) aims to prevent large-scale VAT fraud, but it may dent competitiveness in case it increases the administrative burden of enterprises.
(Ministry for National Economy)
