Various determinants have contributed to the larger-than-expected GDP growth last year, Minister for National Economy Mihály Varga told Hungarian broadcaster Inforádió.

As the Minister stressed, the utilization of EU funds played a key role last year, as in 2014 the Government disbursed EU funding worth HUF 1850bn (EUR 5.96bn). Along with that, other large factors behind the economic expansion were state investment and consumption growth, he added.

He underlined that the volume of exports totalled more than EUR 100bn in the initial eleven months of last year, but the Funding for Growth Scheme of the National Bank of Hungary was also a key driver of growth as it reinvigorated lending. The improvement in employment was another positive phenomenon, he added: last year the number of people in employment was 170 thousand higher compared to the previous year.

Among the risk factors which the country is facing the Minister mentioned a potentially drawn-out Russian-Ukrainian conflict that may dampen the performance of some Hungarian enterprises -- among them banks, such as OTP or Eximbank, or energy company MOL and pharmaceuticals producer Richter. Other potential drawbacks are fluctuating European export markets and deflation within the European Union, which has dragged down Japan’s economic growth for years.

As the Minister explained, family tax allowances have also boosted domestic consumption: last year, these tax incentives left HUF 197bn at families, up by HUF 39bn compared to the previous year.

As far as the introduction of Euro is concerned, the Minister revealed that the country fulfils three out of the altogether four EU convergence criteria: central government deficit is firmly below 3 percent of GDP, inflation and interest rate levels are close to those of the three countries with the best data. All these would permit a fast-track adoption of the Euro, but as Mihály Varga said he “does not think it right”. It is obvious, he pointed out, that for countries which had joined the Euro-zone and had been less developed than the bloc’s average the adoption of the Euro turned out to be a failure. For Hungary, having its own currency is an advantage and it is “worth exploiting”, he said.

(Ministry for National Economy)