Minister of State at the Ministry for National Economy Zoltán Cséfalvay has earlier today met with investors and financial analysts at a conference organized by Barclay’s in London.

At the press conference held after the meeting he said he was repeatedly asked by investors about the possibility of an “election-time budget”. He firmly emphasized that the Government of Hungary is committed to a general government deficit target below 3 percent of GDP. “We are perfectly aware of how painful the fiscal consolidation process has been and which sacrifices the business and private sectors had to make,” the Minister of State said. In the opinion of Zoltán Cséfalvay, maintaining fiscal rigour is also part of political responsibility which clearly means that there will be no election time budget next year, either. Speaking about the forint exchange rate the Minister of State said: it is not in the interest of the Government and not an economic policy tool. He added that he, personally, does not believe that a weak forint would be a potent instrument to boost exports. Improving competitiveness requires a complex economic policy which includes a flexible labour market, investment policy, R&D activities, cutting red tape, lower taxes, focus on entrepreneurial spirit and the manufacturing sector.“A weak currency cannot be the right tool for strengthening competitiveness,” he repeated.

With regard to foreign currency-denominated loans the Minister of State said that everything that could be done concerning this issue the Government has already done; no new measures are planned. He stressed, however, that should any other step be considered the Government would only act after having consulted with representatives of the banking sector.

In his opinion, the debate on the amendment of the Basic Law has not been brought into connection with the decision on lifting the Excessive Deficit Procedure. These two issues are not correlated: one is political by nature and the other one depends on economic facts and figures, he added. Responding to a question about the most pressing Hungarian economic issues investors have been concerned about Zoltán Cséfalvay said that they were most interested in growth prospects and what may be the driver of this growth.

According to Zoltán Cséfalvay, the Government hopes that this year agriculture will have at least a moderately good year, as almost half of last year’s negative growth of 1.7 percent could be attributed to the weak performance of the agricultural sector which was the result of unfavourable weather conditions. “Expecting good weather, however, is no economic policy on its own,” he said adding that the Government is also anticipating that recently completed vehicle industry investment projects will also increase output at this sector and add to overall GDP this year, he said.

When asked about the discrepancy between official estimates on Hungary’s economic growth and those by analysts – which are far more pessimistic – Zoltán Cséfalvay stressed, Hungary’s economic performance is the key issue for this year, but first quarter GDP data will be instrumental in making more precise projections. On the other hand he underlined that – in addition to the aforementioned pro-growth factors – decreasing inflation is expected to translate also into real wage increase which, in turn, may boost domestic demand.

(MTI)