According to Hungary’s Convergence Programme which is to be submitted to the European Union, the Government of Hungary is expecting economic growth of 3 percent and fiscal deficit of 1.9 percent by 2017. The document was presented earlier today by the Minister for National Economy at a press conference in Budapest.

The Minister stressed that Hungary’s economy in the coming years will be characterized by “accelerating growth and a declining debt level”.

The Government is forecasting that the government sector fiscal deficit will fall to 1.9 percent of GDP by the end of 2017, after declining to 2.9 percent this year, 2.8 percent in 2015 and 2.5 percent in 2016. However, as the Minister emphasised, the decreasing of state debt will not require austerity measures.

The prognosis predicts that the unemployment rate will decline to 8.2 percent, consumption growth will average 2 percent per year and the inflation rate will be 2.9 percent next year and 3 percent in 2016 and 2017.

Thanks to steady growth, he added, general government debt is also expected to gradually decrease.

In light of the Converge Programme, the government debt-to-GDP ratio will drop to 75.2 percent by the end of 2017. The Government is also anticipating that the country’s current account will stay in the green and the level of Hungary’s external debt will also continue to decline.

Mihály Varga stated that parallel to reducing the debt ratio the Government also considers it a priority to transform the debt structure. Therefore, domestic sectors are being encouraged to increase their share in debt financing and thus reduce the country’s exposure to foreign financing. As cutting the share of foreign currency denominated debt will also lower exchange rate risks, debt management will become more predictable.

The Minister emphasised that Hungarian GDP growth is expected to be 2.3 percent this year, 2.5 percent in 2015 and about 3 percent by 2017.

The Minister pointed out that external demand is anticipated to further improve, resulting in dynamic export growth of 5.8 percent this year, 6.8 percent in 2015 and 6.6 percent in 2017.

Income growth and the improvement of the economic sentiment index in Hungary are boosting domestic consumption, and thus families are not only saving but spending, too, he added. Following the decline or stagnation regarding household spending over the past years, consumption and spending are expected to pick up after 2014 and grow on average by 2 percent per year.

Economic growth will be underpinned by EU resources, and loans made avaialable through Eximbank programmes and the Funding for Growth Scheme of the National Bank of Hungary.

The Minister said that as external and internal demand is rebounding, corporate investment can also be expected to continue dynamically until 2017.

Responding to a question the Minister said that the Government is not planning a significant taxation system overhaul, and as the flat rate personal income tax was only introduced last year, only its early impacts can be assessed.

(Ministry for National Economy)