More positively, he said the austerity measures have reduced the threat of an immediate financial crisis, and the authorities have more or less met their goals. The global upturn has also played a part in helping the Hungarian economy, Mody remarked. The IMF is worried about how the reforms can be maintained after 2007 and whether it could be a basis for growth. The IMF is afraid that if the 2007 targets are met, then the Hungarian government will not cut state spending quickly enough.
GDP growth in Hungary can and should be 4-5%, but will not be above 2.5-3% in 2007 and 2008, said Mody. Observing that tax rates should be cut in order to boost long-term growth, he said they cannot be cut now because of the budget problems. The government has not yet announced profound changes in the pension and social regimes, and if this remains so in the following 12-18 months, then 4-5% growth cannot be achieved, Mody said. (caboodle.hu)
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