Further fiscal measures only needed if growth drops under 0.5%, says state sec

Hungary’s government will need to take additional measures to meet the fiscal deficit target next year only if economic growth is less than 0.5%, National Economy Ministry state secretary Zoltan Csefalvay said on public television on Monday.

Reiterating what National Economy Minister Gyorgy Matolcsy said on Friday, Mr Csefalvay said Hungary’s GDP growth would be between 0.5% and 1% in 2012, rather than the 1.5% in the budget bill, but the fiscal deficit target can still be met because of the large amount of reserves in the budget.

The 2012 budget bill contains reserves of over HUF 300bn or more than 1% of GDP, including a HUF 50bn buffer against exchange rate risks, he said.

Hungary expects slower growth because of lower growth projected by Germany, its biggest export market.

The economic policy principle that burdens and risks must be shared between the state, citizens and businesses in a crisis holds true, Mr Csefalvay said when asked whether he saw a need for a policy change.

The lesson is that the government must accelerate the pace of structural reforms contained in the Szel Kalman Plan, he said. Many of these reforms are already before Parliament, he added.

The Hungarian government’s recent move to seek an agreement with the IMF was partly meant to prevent a downgrade, Mr Csefalvay conceded.

The agreement aims to create a safety net for Hungary during a time when Europe is in crisis, he said.

Mr Csefalvay said there were big differences between Hungary’s situation at present and the country’s situation in the autumn of 2008, when it signed for a standby arrangement with the IMF and the EU. The IMF now offers more flexible options and Hungary’s general government balance is in a far better position, he explained.

The European Commission has acknowledged Hungary’s general government deficit will fall under 3% of GDP both in 2011 and 2012, he said.