The state budget of 2015 will help achieve the Government’s three key objectives, the assistance of families, the creation of jobs and economic growth, Minister for National Economy Mihály Varga said in his opening speech marking the start of the general parliamentary debate of the budget bill.
The Minister reiterated that following this year’s “quite high” economic growth of 3.2 percent of GDP, for 2015 the Government is expecting – as a conservative estimate -- growth of 2.5 percent, 2.4 percent ESA fiscal deficit and a state debt-to-GDP ratio of 75.4 percent at the end of the year. The Government, he added, continues to be committed to keeping the fiscal deficit below 3 percent.
In the Government’s estimate, the number of people in employment is 260 thousand higher than it was before the onset of the crisis and the unemployment rate is expected to subsequently drop below 8 percent. The structure of the Hungarian economy is becoming more and more balanced as besides net exports domestic demand is also picking up: household consumption has increased by 2.6 percent year-on-year.
He pointed out that economic expansion has also been underpinned by rebounding investment activity. Following this year’s remarkable growth, gross fixed capital formation is set to increase by more than 4 percent in 2015.
Economic growth has also benefited from low inflation: in 2015, the Government prognosticates that inflation – due to improving domestic demand – will rise, albeit moderately, by 1.8 percent, Mihály Varga stressed.
The Minister emphasised that assisting families means that living costs will continue to drop and, as a consequence, families can spend more. This will stem from preserving the real value of wages and pensions, an increase in the number of jobs, higher number of incentives, low inflation and the compensation of banking clients.
The momentum achieved within the economy must be maintained next year, Mihály Varga stated. Therefore, the tax and regulatory system aiming to assist enterprises, investment and exports will remain in place. As of 2011, the Government has cut the corporate tax rate from 19 percent to 10 percent up to an annual tax base of HUF 500 million. “We aim to bring this rate down to a single-digit figure within this parliamentary term,” he stressed.
As another measure for stimulating economic growth the Minister mentioned that next year the largest ever economic development programme is to be launched: some HUF 2500bn or 7.5 percent of GDP will be disbursed from the state budget for EU-financed programmes and investment projects. In the EU development period of 2014-2020, Hungary will receive funding of more than EUR 34bn which, together with the required domestic resources, will add some HUF 12 thousand billion to development projects. In the aforementioned period, per capita EU funding will be the highest ever and it is the second best result within Europe, the Minister said. He added that 60 percent of these resources will be spent on economic development and creating jobs.
Mihály Varga also spoke about the family tax regime, within which the allowance for parents with two children will gradually double as of 2016 and first marriages will be supported with a tax incentive. As a result – thanks to various incentives and allowances -- some HUF 240bn more will be left at families in 2015.
“We still want to free people from the debt trap, therefore the issue of foreign currency borrowers continues to be a priority,” he said. Through the compensation of borrowers by their banks monthly instalments will be lower and this improves the financial situation of families. In the Government’s estimate, the refunding scheme will return some HUF 1100bn to families, monthly instalments will be down by 25-30 percent, while the principal is also expected to be lower by some 20 percent.
The act on fair banking will also enter into effect soon, and the compensation process will be completed until the end of next year. Therefore, the Minister stressed, the 2015 Budget is also the budget for compensation by banks.
As far as lower utility prices are concerned, the Minister emphasised that these are to remain in place in 2015 and thus the disposable income of families will be some HUF 30bn higher.
In addition, as of 1 July 2015, the Government will introduce a new home financing subsidy and measures aiming to reward public administration employees will continue.
The Government also pays special attention to improving the situation of pensioners. Pension benefits will in 2015 increase in line with inflation and thus their purchasing value will be preserved. Pensioners will also benefit from lower utility prices and the introduction of a state-owned public utility service provider.
In accordance with the “workfare instead of welfare” principle the Government is aiming to provide work for all able-bodied and willing people in Hungary. Consequently, the Start work programme will be continued and gradually extended. In addition to the current annual 200 thousand public work employees, the number of these people will increase by several tens of thousands as of the second half of 2015 and the Government will spend HUF 35bn more, altogether HUF 270bn, on this programme in 2015. Some other Government employment schemes, such as the Job Protection Action Plan, will also be continued. As a new feature, parents with small children working in a part-time job also be fully entitled to tax incentives from next year.
Speaking about EU funding, the Minister pointed out that Hungary continues to receive some HUF 390bn in the form of direct agricultural subsidies. “Upon examining Hungary’s net financial position we can conclude that we indisputably benefit from EU membership. The country’s obligations total HUF 296bn, which amount is only 17 percent of the HUF 1720bn EU funding.”
The budget, he added, also contains an estimate of HUF 60bn within the Country Protection Fund as a buffer for unforeseeable risks. In addition, reserves totalling HUF 100bn are earmarked for the implementation of extraordinary Government measures. HUF 60bn is set aside as subsidy of healthcare services institutions in case of potential financing bottlenecks related to debt servicing.
As a whole, revenues and expenditures of budgetary chapters total HUF 2907.2bn and HUF 7018.6bn, respectively, in 2015.
As of 2015, the amount allocated for childcare facilities, such as for the construction of kindergartens and other related investment projects will also increase perceptibly, and reach HUF 2.5bn.
Local government will have a budget of some HUF 2500bn next year, the Minister said, of which the central sub system of the state budget will provide more than HUF 690bn. Thanks to the debt assumption of the Government, local governments start the year without liabilities, Mihály Varga said.
(Ministry for National Economy)
