At the same time, to reach this, Hungary has to change its attitude to work since now slightly more than 50% of the active population has some job. Also, Hungary keeps postponing serious structural reforms because of the fight over the way of redistribution and this can make Hungary lag behind for a long time. Both visions that of prosperity or economic crisis, depict false reality.
There is no crisis, naturally, he said, since OECD prognosticates an over 3% GDP growth for 2009, budget has almost reached balance, and the strong forint also shows that confidence in Hungary’s economy has not declined. Though last year GDP growth was as low as 1.3% but this was mainly due to the public sector: private sector produced a 4% growth and export expanded by 10%. Neither is there a social crisis, the gap between the extremes in income was 6.2% last year, the smallest difference after 1992.
Taxes on labor are high because employment level is low, he said. There are twice as much people living on minimum wage than in Slovakia, the number of enterprises are too high, there are 450,000 pensioners, who retired before reaching the age limit, and there are two many people interested in tax evasion and redistribution. Enterprises spend 6.8% on tax administration, while the EU average is 3.5%. The difference is Ft 750 billion, which could be transformed into tax rebates.
As a response to what Bajnai said at the meeting, Mihály Varga, deputy chairman of the opposition party Fidesz, said that according to the calculations of the central bank (MNB), the Hungarian economy’s performance is much below the potential level. What’s more, the expected long-term performance fell 1 percentage point, which means that now only a 3% annual GDP growth „is in” the economy. It has become clear that Hungary can catch up only with the help of a strong forint so a further strengthening in exchange rate can be expected. Still, the date of the Euro adoption might be postponed even until 2020.
Varga was not enthusiastic about the continuous revaluation of the Hungarian currency during the past few months, either, saying that the other V4 countries produced stronger currencies. Fidesz would modify the convergence program on the base of Swedish, Dutch and Finnish examples. Budget adjustment should have been started by decreasing expenditure, said Varga without providing any details. (Gazdasági Rádió)
