The Government’s economic policy has proven to be effective and the 2016 Budget – based on recent achievements -- will be the budget of tax cuts and economic development, Minister for National Economy Mihály Varga said in the exposé opening the general debate of next year’s budget bill.
The Minister stressed that the budget focuses on economic development, the optimal utilization of opportunities and promoting the well-being of families.
The 2016 Budget is based on a GDP growth estimate of 2.5 percent, budget deficit of 2 percent, 1.6 percent inflation rate, higher consumer demand and extra fiscal revenues of HUF 330bn for 2016. Lower general government debt is projected to cut interest expenses by HUF 75bn. These factors are expected to help reach economic policy goals, such as reducing taxes and boosting economic expansion.
According to Mihály Varga, the biggest winners of next year’s budget will be Hungarian families, as tax measures will leave as a whole HUF 170bn at families. Of that, HUF 120bn results from the reduction of the personal income tax rate from 16 percent to 15 percent, HUF 25bn comes from lowering VAT on pork from 27 percent to 5 percent and HUF 10bn is expected from cutting public utility charges and duties.
As of 2016, the amount of family tax allowances for families with two children is set to rise gradually, over four years, from the current HUF 10 000 per month to HUF 20 000 by 2019. This measure will improve the financial status of 350 thousand families or 1.4 million parents and children.
The childcare benefit extra will be maintained in 2016, together with the tax incentive for couples who get married.
The amount spent on free meals at nurseries and kindergartens will be increased from HUF 61bn this year to more than HUF 71.7bn in 2016. Thanks to this measure, the number of children receiving free meals at these institutions is estimated to be 230 thousand higher as of autumn 2015.
In the first four grades of primary schools, school books will be offered free of charge, while in case of older pupils free school books will be distributed depending on family incomes.
Next year, the value of pensions and certain wage compensations will be preserved and adjusted by the inflation rate. The “Women 40”programme, which enables women to retire after 40 years of service, will be continued.
The Country Protection Fund, set up to fend off unforeseeable risks, is to include HUF 100bn, up by HUF 70bn in comparison to this year. In addition to that, another stability reserve fund has also been set up for extraordinary Government measures with resources of HUF 135bn.
Reaching full employment has also been among Government priorities. The Government is expecting that the number of economically active people and those in employment will increase in 2016, and the unemployment rate is set to drop to about 6 percent. Labour market stimulus programmes are to be continued or even expanded. The Job Protection Action Plan, which helps preserve the jobs of some 900 thousand people, will be extended to agricultural sector employees. Next year, the number of people employed through public work schemes will rise by 40 thousand, thus as a whole 240 thousand people will have the opportunity to participate in the programme, on which the Government is spend HUF 340bn instead of this year’s HUF 270bn.
Over the coming months, he added, the structure of the Hungarian economy is expected to become more balanced, and domestic demand will be stronger along with exports. Household consumption growth is seen to accelerate, thanks to the phasing out of forex loans, higher wages in real terms, record-high employment and family-focused Government measures.
Following marked growth last year, the volume of investments is another indicator seen to edge higher next year, as a result of the utilization of EU funds, SME lending schemes and favourable interest rate environment.
Under the career model of army and law enforcement employees, as of July 2015 wages will increase on average by 30 percent, and by 5 percent each year up to 2019. In the budget, HUF 121.7bn has been allocated to cover the 35 percent increase in 2016. The career model of teachers will be continued, and thus the salaries of sector employees will be higher each year up to 2017.
Some HUF 15.3bn has been earmarked for extra healthcare sector expenditures, mainly for the payment of higher wages.
As of July 2016, a civil servant career model will also be launched.
Speaking of EU funding, the Minister pointed out that in the 2014-2020 EU fiscal period the funding options of Hungarian enterprises will improve substantially. In 2016, some HUF 1000bn of EU funding is scheduled to be channelled to beneficiaries, of which HUF 500bn is set to assist development projects which boost economic growth.
This funding, the Minister said, will be complemented by some HUF 100bn of economic development programmes related to countries and cities with county rights. Speaking of the financing of local governments, Mihály Varga stated that the task-based financing model will be maintained and even fortified. In 2016, the overall budget of local governments will total some HUF 2500bn, for which the general government budget provides more than HUF 660bn.
The budget of the Pension Insurance Fund will be balanced in 2016, revenues are expected to fully cover estimated expenditures, and the same is true for the Healthcare Fund.
Finally, Mihály Varga said that the Fiscal Council has not worded criticism on the credibility or feasibility of the bill that would raise the possibility of objection. However, the panel has called attention to certain revenue and expenditure-side risks and recommended an increase of reserves. In accordance with the proposal, the Government has raised the estimate of the Country Protection Fund. The bill has also been assessed by the State Audit Office.
(Ministry for National Economy)
