At the press conference organised to evaluate the Government’s economic policy over the past three years, Minister for National Economy Mihály Varga said that the Hungarian Government and Brussels are also expecting economic growth to be about 1.5% for 2014, which is a realistic estimate, but if Europe succeeds in emerging from the recession, increased exports will mean even greater growth for Hungary. The Government has laid the foundations for economic growth, but Hungarian growth cannot be expected to pick up without an upswing in Europe, Minister Varga said.

He called the policy of “Opening to the East” a “small window of opportunity”, which – as he said – is beginning to bear its first fruits. The 0.7% growth estimate of the Government for this year is “cautious and conservative”, he stated. In the Minister’s opinion, the Government cannot be expected to submit next year’s draft budget before the summer recess of the Parliament, as it did last year; the draft should be adopted in autumn and thus the deadline laid down in the Budget Act will be met.

The Minister for National Economy also believes that the country cannot be expected to sell another batch of foreign currency-denominated government securities “within days”, adding that market conditions are being constantly monitored and the Government is ready to act as required.

In his words, there were favourable developments on international financial markets over the past couple of weeks. Provided market sentiment allows it, the Government may decide to sell more securities, but the jury is still out regarding this issue, he said.

The Ministry for National Economy is still debating whether to repay a tranche of the IMF loan taken out in 2008 ahead of schedule Minister Varga emphasised, which would be due soon, but no decision has been made thus far. According to their calculations, the country could afford it, but the decision mainly hinges on interest rate calculations.

The Minister also reiterated that it is currently not possible to abolish sectoral surtaxes, as without these the below 3% deficit target would be difficult to achieve.  In the future, it may be an option, but then it must be examined what kind of taxes could make up for the ensuing revenue shortfall. He also added that the current taxation system is expected to stay in place.

In the opinion of the Minister, the Government has succeeded in realising the major part of its economic policy over the past three years, but – as he said – the work has not been completed yet, as further improvement is necessary in several fields.

This year, signs indicating that the Hungarian economy is performing better and has been recovering since hitting bottom in 2010 have already appeared, Minister Varga announced.

He called debt reduction, the strengthening of the middle class and the broadening of common burden sharing the three major pillars of the Government’s economic policy. 

The Minister added the extreme importance of preserving public trust as a precondition for the implementation of economic policy. “Some Southern European countries show the disastrous consequences of improper adjustment programmes and erroneous measures,” he said.

As he explained, in Hungary the income situation has not deteriorated, and there is in fact slight improvement thanks to family tax allowances and the increase of the minimum wage for unskilled and skilled workers, which has exerted a positive, albeit small, effect on consumption.

(Ministry for National Economy)