Having decreased general government deficit has not stifled economic growth in Hungary, as an adequate economic policy mix had been applied. Thanks to this, the recent pick-up of the Hungarian economy has been broad-based and not limited only to a few sectors, Deputy State Secretary for the Budget Péter Benő Banai said at a press conference in Budapest.

The achievements stemming from fiscal discipline are translating into practical results, as people are also beginning to enjoy some positive changes, the Deputy State Secretary said. He added that these results must be preserved, because further goals can only be fulfilled provided budgetary policy remains consistent.

Péter Benő Banai said, next year’s budget shows that due to the low deficit and declining debt levels the cost of servicing state debt may be HUF 70-80bn – in case of favourable interest rates even HUF 100bn – lower in 2014.

Rebounding economic growth and fiscal discipline provide the financial means through which 270 thousand families are expected to gain extra income as the family tax allowance is extended in 2014, the Deputy State Secretary stated.

In his opinion, Hungary’s Basic Law also guarantees that results are maintained, as it stipulates that governments shall always prepare and implement a budget in a way which ensures that the state budget becomes lower and this strict fiscal policy shall be continued until the government debt-to-GDP ratio drops below 50 percent.

Speaking about the below 3 percent deficit target, Péter Benő Banai said that this will not be a one-off result, “as we hope that 2014 will already be the fourth year when Hungary’s general government deficit will stay below 3 percent,” which is a remarkable achievement even from an international perspective, he added.

He pointed out that currently excessive deficit procedures (EDP) are conducted against 17 EU member states, which means that in the majority of member states the deficit exceeds 3 percent, whereas Hungary had after nine years managed to exit it. As the Deputy State Secretary stressed, this fact carries special significance as Hungary was capable of achieving it after the onset of the economic crisis.

Péter Benő Banai underlined that according to Eurostat data before the crisis the majority of EU member states could keep the deficit below 3 percent, and only four countries – among them Hungary – had been under the EDP, and the number has soared to 17 since the onset of the crisis.

He also stressed that within the Hungarian economy the deficit figure is not the only positive piece of data: recent economic growth statistics show that Hungary has been performing better than the EU average, the inflation rate also hit a historic low and the current account posted a significant surplus.

As far as the inflation rate is concerned, the Deputy State Secretary said that it has not been this low since the beginning of the 70s. He also called attention to the fact that in contrast to Hungary several countries have been attempting to improve their budgetary situation by increasing prices, generating inflation and boosting revenues from consumption-type taxes.

(Ministry for National Economy)