A trend reversal has been under way in 2012 as general government debt has been declining and state budget deficit could be reduced to below 3 percent of GDP, said Minister of State Zoltán Cséfalvay from the Ministry for National Economy on Thursday, at a conference in Budapest.

At the conference organized by the economic daily Világgazdaság  he emphasized that according to the report published by the European Commission the state budget deficit-to-GDP ratio will be 2.5 percent in 2012, 2.9 percent in 2013 and 3.5 percent in 2014 in Hungary, although this latter figure has been disputed by the Government. He also added that in the European Union the deficit will not be below the 3 percent threshold on average even next year, as current estimates predict 3.2 percent. Since 1995, for which period relevant data are available, the Hungarian deficit figure could never before be pushed below 3 percent.

The EC report also signals that a trend reversal regarding general government debt-to-GDP ratio is also taking place, as after a figure of 80.8 percent last year the ratio will be 78.4 percent this year, 77.1 percent in 2013 and it is expected to decline further to 76.8 percent in 2014, the Minister of State explained. In 2013 the average debt rate forecast for the EU will be 88.1 percent.

Going forward, economic strategy will focus on preserving stability and further reducing general government debt, along with reforming local governments and increasing economic transparency, although this last step the European Commission “could not price in yet” in their current deficit projection on Hungary, Zoltán Cséfalvay said. The introduction next year of the 16 percent flat-rate personal income tax will mark the end of taxation overhaul and cement down the new system.

(Prime Minister’s Office)