The previous Government submitted the Budget Bill for 2010 on the basis of entirely unsubstantiated data. Without the extraordinary measures of the Government headed by Prime Minister Viktor Orbán and the greater than anticipated economic growth central budget deficit would have exceeded 7 percent in 2010. Economic growth, which was almost 2 percent higher than in the submitted macro outlook, improved fiscal balance by almost 0.7 percent. The combined net effect of the two action plans reduced deficit by another 2 percent, whereas the measures of December improved the central budget position by almost 0.5 percent in 2010.
In the third quarter of 2012 the number of employed people increased by almost 80 000 compared to the corresponding period of the previous year, and simultaneously the employment rate among those aged 15-74 years has reached the level of 51.4 percent which has been the best figure of the past ten years. The increase in employment has been the consequence of the labour market measures of the Government and the optimal organization of public employment schemes. Going forward, the Government adheres to its aim of introducing potent measures in order to sustain these positive tendencies in the field of public employment schemes and by stimulating hiring and investment in the private sector. The Job Protection Action Plan has been one of the instruments for fulfilling this purpose.
According to an OECD study on taxation policies published recently, it was Hungary where total tax burden as percentage of GDP declined to the greatest extent in 2011 compared to the previous year, and with regard to cutting the tax burden on income and profit as percentage of GDP Hungary also tops the list.
The Hungarian Government continues to be committed to its policy aimed at getting the excessive deficit procedure against Hungary lifted and pursuing prudent economic management. The measures announced on 5 October the Government had considered sufficient, but acknowledging that the European Union adopted a different standpoint, new string of measures had been decided.
When analyzing key macro-economic indicators it can be observed that the crisis has still been ongoing from several aspects in the European Union and in the region as well. Unfortunately, Hungary is no exception in this regard. The following short analysis aims to present the sectors which have been putting on an above average performance in Hungary and have therefore bottomed out or which at least are in a better position than they were in 2008.
On Friday 5 October 2012 the Government of Hungary published its latest package of draft measures, formerly introduced measures as well as the updated macro economic outlook which takes into consideration the aforementioned measures and a different economic growth prospect in its Progress Report in order to fulfill recommendations proposed by the EU Economic and Financial Affairs Council. Markets welcomed the Report which was reflected in prompt forint appreciation and a lower Hungarian CDS spread. After the announcement at 9am the forint exchange rate gained almost 1 percent against the euro thereby outperforming regional currencies.
General government gross public debt in percent of GDP, except for two quarters, has been actually on a declining path since the second quarter of 2010, and since the third quarter of 2011 this decline has been even more pronounced. General government net lending in percent of GDP has also significantly improved in the past couple of quarters. Public sector net borrowing as of GDP has not been as favourable as in Q2 2012 for the last 11 years.
It is not only the current level of CDS indicators that is worth analyzing but their change over time can also lead to relevant conclusions. This short study aims to present how CDS premia have changed since October 2008 in certain countries (Hungary, Germany, Austria, France, the Visegrád countries and the PIIGS countries). According to the analysis, the current CDS figures for Hungary and the other Visegrád countries are around the October 2008 base, while German and Austrian credit risk premia are almost double the figure of October 2008, the French equivalent is three-and-a-half times higher and premia for PIIGS countries (data excluding Greece after March 2012, due to its technical default) are five-fold more on the market.
In the period of 2003-2010 increasing overhead expenses resulted in huge extra costs for households. Analyzing statistics, it can be concluded that costs associated with the two largest expenditure categories for families – that of food and housing -- have shifted gradually toward higher overhead costs.
Net external financing capacity of Hungary has steadily and significantly improved in the past couple of years. The same applies to the first quarter of 2012, when the combined surpluses of the current account and the capital account amounted to 3.1 percent of GDP. The current account surplus of the country was the consequence of the continued positive balance of real economy transactions, and the capital account – due primarily to the inflow of European Union resources -- has also recorded a significant surplus.