Hungary has already achieved compliance with two out of the three euro zone accession requirements: those on inflation and the government fiscal deficit, Minister for National Economy Mihály Varga said at the general assembly of the Hungarian Association of International Enterprises.

As the Minister pointed out, it was in 2002 that Hungary was capable of meeting one criterion for the last time, as general government debt at that time did not exceed 60 percent of GDP. “The road to introducing the Euro will be long, but we are moving in the right direction,” he said.

The Minister said that it cannot be ruled out that the inflation forecast may be further revised downward. As he said, last year the Government calculated with an annual forint depreciation rate of 5.2 percent and that figure was cut to 3.1 percent in April. However, “this year, inflation may hardly reach 2 percent, let alone 3 percent,” he added. Mihály Varga also said that Hungary “cannot and should not” pursue an economic policy that disregards foreign investors and foreign-owned enterprises.

In his opinion, it would be a mistake for the Government to seek economic isolation and formulate objectives that might restrict the flow of foreign capital. In his presentation, he also introduced two alternative economic policy scenarios. One of them is based on the concept of stimulating growth via Government-controlled fiscal instruments. This, however, would not be a wise choice, he warned, as the country’s recently achieved economic balance would thus be offset. “In 2002-2006, the furnace was being stoked with money, but the locomotive would still not perform better.”

He said that another potential alternative was for the Government to further steady the economic balance via some major adjustments. As he said, this scenario might cause an imbalance between fiscal measures and social consensus. In his welcome speech, President of the Hungarian Association of International Enterprises János Rudnay called attention to the fact that all 50 members of the Association agreed that under current conditions growth must be top priority.

He said that enterprises are keen to participate in such efforts and are asking for the help of the Government to improve the investment climate, coordination and dialogue, and demand “predictability instead of activism”. From this aspect, “generalisations and communication that is hostile to multinational companies” are counterproductive, he added.

(Ministry for National Economy)