The Minister for National Economy Mihály Varga said at a presentation held at the Óbuda University, he hopes that “there will be room for more rate cuts; it is a possibility given the historic low level of inflation.”

At a lecture on the impact of the 2008 economic crisis on Hungary, entitled Extraordinary economics lesson, the Minister pointed out that Hungary has been recovering, in 2013 the country is already closing the gap with the region’s leaders and growth has been based on a sounder economic structure.

Responding to a question the Minister said that a meaningful debate over joining the eurozone can only be started at the end of this decade. Mihály Varga stressed that the previous quarter’s GDP data which show annual growth of 1.7 percent is signalling an economic U-turn. He also underlined that the current structure of the economy is much sounder than before, household consumption is joining growth factors and investment rate is also picking up.

He added that the shortfall regarding the government’s financing is some EUR 3bn, while the renewable financing requirements of the state budget total EUR 17.3bn. Out of that amount, foreign currency denominated debt constitutes EUR 5.3bn, while the stock of forint-denominated government securities is worth EUR 15bn. As a whole, he said, the country spends 20 percent of Hungary’s GDP on servicing debt.

In the opinion of Mihály Varga, it is a very favourable phenomenon that since the summer of 2010 CDS premia for Hungary have fallen significantly. The largest challenge the country is facing in the coming period will be to boost the investment rate and to that end corporate lending must be reinvigorated, the Minister stressed. Mihály Varga also said that the formerly prevalent high loan-to-deposit ratio used to trigger some very negative tendencies within the country’s banking system, whereas currently the opposite is taking place, as bank lending has almost come to a standstill. The note bank has been facilitating lending through the Funding for Growth Programme, he added.

The employment rate shall be increased further, as in the Czech Republic, a country where the size of population is similar to Hungary’s, some 5.1 million people are in employment, while the corresponding figure for Hungary is 3.99 million. The Government’s Job Protection Action Plan is designed to improve this situation, the Minister stated.

(Ministry for National Economy)