The European Commission has announced its proposal to abrogate the excessive deficit procedure against Hungary.

On 30 May 2012, based on the 2012 convergence programme and further specification of savings measures, the Commission concluded that Hungary has taken effective action regarding the correction of the excessive deficit. Despite Commission forecasts well in excess of 3%, the actual deficit for 2012 was only 1.9% of GDP.

In 2013, the deficit is foreseen by the Commission to reach 2.7% of GDP, thanks to a series of consolidation measures, and thus to remain well below the 3% of GDP Treaty reference value. Based on this deficit forecast and additional information received since then, general government debt is expected to decrease to below 77.0% of GDP in 2013 and even further in 2014.

The Commission's proposal indicates that the era in which there was debate between Hungary and the EU with regard to Hungarian economic policy is at an end. The acknowledgement of our indices and economic achievements is a clear indication that Brussels has finally understood and accepted the path that Hungary has been following since 2010.

The decision is especially positive, because the requirements of the EU and the interests of the people of Hungary point in the same direction: we did not wish to merely conform to an abstract requirement and produce figures for good effect, but rather we have executed an about turn in economic policy that has put an end to the wasting of future resources and the cycle of indebtedness of the Hungarian people.

The Government succeeded in achieving these goals without inhibiting opportunities for economic growth: according to the latest statistics, the economy is again picking up, growth has begun and productive foreign capital is flowing into the country in large quantities.

Last year, the amount of foreign direct investments exceeded the previous year’s figure and it was the largest sum ever recorded. The amount of outbound FDI by Hungarian enterprises in 2012 was also above the level registered one year earlier. In addition to this, according to the information released on Monday by the GKI research institute, expectations for Hungary’s economic performance improved “significantly both among businesses and consumers”.

Minister for National Economy Mihály Varga said that in 2013 Hungarian economic policy is turning its focus on fostering economic growth. Technically speaking, the economic recession has stopped in Hungary. New figures have justified the Government's earlier calculations, the Gross Domestic Product increased by 0.7 percent in the first quarter compared to the fourth quarter in 2012, decreasing by only 0.9 percent compared to the same period last year, which is much better than indicated by previous forecasts.

The Minister also noted on Tuesday that in case the European Union decides to end its excessive deficit procedure against Hungary, the freezes on budget expenditures announced so far will likely be sufficient without the need for further fiscal adjustments.

A strengthening forint, lower lending rates, a more easily reduced government debt – these are what may result from the abrogation of the Excessive Deficit Procedure, which Hungary has been affected by since 2004. The positive decision will have a favourable effect on the whole Hungarian economy, possibly leading to decreasing risk premiums and interest rates. In addition, it will ensure that Hungary does not miss out on significant amounts of European Union funding.

We are moving in the right direction, but an essential requirement for the realisation of our objectives is increased confidence from both domestic economic operators and our foreign partners, and this in turn requires stability and predictability. The economic bedrock for this – as now acknowledged also by the European Union – is in place.

(Prime Minister's Office)