The EUʼs Economic and Financial Affairs Council (ECOFIN) recommends that nominal growth in net primary government expenditure in Hungary should not exceed 3.9%, corresponding to an annual structural adjustment of 0.75% of GDP in 2019, in its country-specific recommendations formally adopted on July 13.
For 2018, Hungary should comply with the Council recommendation made in June with a view to correcting a significant deviation from the adjustment path towards the medium-term budgetary objective, the recommendation states, cited by Hungarian news agency MTI.
The Council, which is composed of the economics and finance ministers of the 28 EU member states, also recommends the country continue simplifying its tax system, in particular by reducing sector-specific taxes.
Hungary should improve the quality and transparency of the decision-making process through effective social dialogue and engagement with other stakeholders and by regular, adequate impact assessments, the recommendation notes.
In addition, Hungary is advised to reinforce its anti-corruption framework, strengthen prosecutorial efforts and improve transparency and competition in public procurement, among other areas, through further developing the e-procurement system. Competition, regulatory stability and transparency should be strengthened in the services sector, in particular in retail.
The Council recommends that Hungary unlock labor reserves through improving the quality of active labor market policies, improving education outcomes and increasing the participation of disadvantaged groups, in particular Roma, in quality and inclusive mainstream education. It also urges improvement in the adequacy and coverage of social assistance and unemployment benefits.
In June the Council recommended Hungary take measures to ensure that the nominal growth of net primary government expenditure does not exceed 2.8% in 2018, representing an annual structural adjustment of 1% of GDP. Hungary should report on action taken by October 15, 2018.
The Council established that in 2017 the growth of Hungaryʼs government expenditure was well above the expenditure benchmark set by the Council in July 2016, and Hungaryʼs structural balance deteriorated to -3.1% of GDP, 1.6 percentage points of GDP away from its -1.5% of GDP medium-term objective.