Growth to offset revenue shortfall from tax cut, says Varga

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The Hungarian government projects economic growth in excess of 3% next year, which could offset the revenue shortfall stemming from a reduction in payroll taxes, Minister for National Economy Mihály Varga said Thursday, according to Hungarian news agency MTI.

The approved rise in the minimum wage will add HUF 180 billion to central budget revenues, while the enacted payroll tax cut would reduce them by HUF 410 bln, Varga said at a session of the parliamentary Economic Committee. 

The government is confident that increased economic performance will ensure the additional revenue to balance the shortfall, the minister said. The government has undertaken to cut taxes and the two measures combined will leave significant funds in the economy, Varga added.

The government does not plan to amend the 2017 budget, though a decision on an eventual amendment could be taken after the data of the first three months are known, the minister said in response to a question from the committee.

The EU-conform accrual-based general government deficit was 0.7% of GDP in the first nine months of 2016, and the full-year deficit could be kept below 3% of GDP as targeted, Varga said.

In October the government reduced the 2016 EU-conform general government deficit target to 1.7% of GDP from 2% after a low deficit in the first three quarters. The central government registered an unprecedented cash flow surplus in the first ten months.

The ESA deficit is forecast to grow to 2.4% of GDP under the 2017 Budget Act, which targets GDP growth of 3.1% for next year.

Varga put this yearʼs growth rate at a little under 2.5% at a conference organized by Deloitte Hungary in Budapest on Thursday.

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