Speaking at a forum organized by the Hungarian Chamber of Commerce and Industry, Prime Minister Orbán said he expects economic growth to resume already this year and he considers lower interest rates a key issue. He also announced that the Government would make it possible for SMEs to convert their forex loans into forint loans.

At the conference the Prime Minister said, in 2014 economic growth will be perceptible, but he would be highly disappointed if the 0.7-0.9% growth target anticipated by the state budget would not be surpassed already this year. As he said, the economy could expand already in 2011 and it has to grow this year, too. In case it does happen, as of 1 July 2013 the Government will launch a new programme, similar to the Job Protection Action Plan, aimed at stimulating employment and reducing the burdens of SMEs.

Speaking about corporate loans he said, it is crucial to have lower (forint) interest rates in Hungary – without interfering with banks – and to have loans for enterprises with interest rates significantly below the current level of 8-10%, as SMEs cannot finance loans available with the current conditions, he stressed.

The Government will enable this sector to convert forex loans into forint loans. In the first half of this year financial schemes shall be set out which will allow SMEs to swap their forex debt under reasonable conditions. The Prime Minister entrusted Minister for National Economy Mihály Varga with this task.

He also reiterated that he considers it unhealthy that a substantial share of the Hungarian banking system is owned by foreigners and the Cabinet aims to increase the proportion of Hungarian-owned banks to 50%.

Viktor Orbán also mentioned the necessity of levying tax of 35% on luxury goods, but – as he said – this may prompt a debate with international institutions. He stressed that taxes on labour shall be further reduced, and in case economic growth materializes some of that must be used to finance this tax cut.

The Prime Minister called it favourable that the inflation rate dipped below 3%, adding jokingly, that no sooner did the new president take his post at the National Bank of Hungary than the note bank’s inflation target was achieved.

He also discussed at length the issue of “freedom to manoeuvre”, adding, there was far more at stake with regard to “solving the entire IMF issue” than simply the financing of the country. At the heart of the issue was whether the Government could prove to have a national policy “with our backs to the wall” which would eventually allow “to find our friends no matter how many enemies we have” (...) and “weather the storm on our own”, he said. Therefore, in his opinion, the debate with the IMF has been a struggle to gain the country’s freedom to manoeuvre, stressing that “we can cope on our own without an IMF loan.” He stressed that increasing the room to manoeuvre has been one of the pivotal tasks of economic policy.

He remarked when speaking about György Matolcsy as he was appointed President of MNB after he had been at the helm of Economy Ministry that his opponents often accuse him of being a “dreamer”. “No wonder it is often said, as he is a man of economic models,” but a new economic model was precisely what Hungary needed back in 2010, instead of piecemeal reforms, and now “the new economic model has to be carried on.”

Concerning employment objectives he said there should be as many as jobs as jobseekers. “We are not that far off,” he said, adding that the Government may perhaps reach this goal by the end of this year.

According to the master plan of the Government, innovation spending will increase to 4-5% of GDP. The Cabinet, he underlined, is also committed to implementing the e-toll system and connecting cash machines with the tax authority as well as to transforming tobacco trade.

Ministry for National Economy Mihály Varga called reigniting economic growth a priority and said that for the development of enterprises HUF 516bn had been appropriated in the New Széchenyi Plan. Out of that amount, until recently HUF 441bn was approved on the basis of tenders, but only HUF 167bn was allocated, so payments shall be speeded up.

Speaking about the tasks the country is facing with regard to the EU’s upcoming fiscal period, he said that large investment projects shall boost employment: EU funds must be utilized to increase the number of real labour market jobs. He called it one of the key tasks he is facing to shore up the taxation policy department of the Ministry.

President of the Hungarian Chamber of Commerce and Industry László Parragh said in the future the organization intends to cooperate with regional decision makers regarding the support and evaluation of EU tenders.

(Prime Minister's Office)