The decision of Standard&Poor’s announced last Friday also proved that it had been right to implement reforms and carry out financial consolidation relatively quickly and in one go, Minister of State Zoltán Cséfalvay said at a conference organized by the Hungarian Business Leaders Forum.

Last Friday, Standard & Poor's Ratings Services revised its outlook to stable from negative on the long-term sovereign credit ratings of Hungary. With this step the downgrading of the country’s credit rating is off the agenda. After quoting the S&P report Zoltán Cséfalvay stressed that the credit rating agency is expecting economic growth of 2.2 percent for 2014 and an improving state debt path, while it is forecasting general government budget deficit to be below 3 percent in the coming years.

The Minister of State pointed out that Hungary has kept the fiscal deficit below 3 percent of GDP since 2010, the level of state debt has been decreasing, the economy has been placed on a growth path and this expansion has no longer been driven only by exports.

Zoltán Cséfalvay stated that the Government has concurrently carried out financial consolidation, economic stimulus reforms – for example in the field of labour market and regional development – and the overhaul of the taxation system. He called attention to the fact that as a result of labour market reforms, according to the latest data compiled by the Hungarian Central Statistical Office, the number of people in employment in Hungary is 4 million 53 thousand, up by 300 thousand since 2010. These figures, he added, are the best in 22 years and the unemployment rate also decreased to 8.6 percent.

The Minister of State continued his presentation with investment data: Hungary’s FDI growth in percentage of GDP was the largest among the Visegrád Four between the second quarter of 2010 and the third quarter of 2013, and the investment rate is also above the EU average.

In the opinion of Zoltán Cséfalvay, the Government’s reindustrialization policy has played a key role in placing Hungary on a growth path and by now the sector’s share of the country’s GDP is far above the EU average.

In his speech the Minister of State also said that in order to achieve sustainable economic growth the country must overcome several challenges. Among the tasks ahead he singled out the bolstering of R&D, the further improvement of business environment and certain tax changes. Speaking about the latter he said that small taxes which generate low revenues and increase red tape must be reconsidered, while the tax burden on R&D must be lowered.

Zoltán Cséfalvay emphasised that reindustrialization must be expanded, the role of SMEs as suppliers must be strengthened and the added value of Hungarian exports must be increased. In addition, cooperation between higher education, large enterprises, SMEs and start-ups must also be made closer, he stressed. The Minister of State called attention to the fact that along with their production capacity some large enterprises have brought their R&D activities also to Hungary.

He added that within the reindustrialization policy priority areas must be more concrete and the policy must focus on divisions in which Hungary has some comparative advantages, such as creative sectors, IT, biotechnology or pharmaceuticals.

The first step in lowering the tax burden would be if R&D expenditures were deductible from the payable tax and not from the tax base, Zoltán Cséfalvay emphasised and added that certain changes must be made within the field of education and EU resources must also be utilized in an effective and reasonable way.

(Ministry for National Economy)