Vértes said he agreed with Lajos Bokros, another speaker at the conference and Hungary’s former finance minister, that there is a political crisis because a big part of the state’s assets, whether it be in the education, healthcare or pension systems, are managed as “fiefdoms”. However, he said there was no growth or balance crisis. Hungary’s economy has expanded an annual average 4.5% for the past ten years, in line with the global average, as opposed to claims of the opposite, he said. Vértes noted that Hungary’s per-capita GDP at purchasing power parity was 53% of the EU 15’s, higher than any other EU newcomer but the Baltic states. According to Vértes there is no direct relationship between consumption and growth, and argued that the government’s austerity measures would cause growth to slow less than expected.

Hungary’s growth and growth prospects depend rather on the economies of its main export markets, Germany, Austria and Italy, he said, pointing out that three-fourths of Hungary’s manufacturing output is exported. Speaking about Hungary’s balance, Vértes said that Hungary has not a twin deficit problem as its current account and budget deficit had not moved together for 7-8 years, though he conceded the former had been over 4% of GDP since 1997 and the latter since 2001. Hungary’s external financing requirement was the same between 1998-2000 as between 2001-2004, Vértes said. The trade deficit was earlier 8% of GDP, but is now only 3%, and it will disappear if it is linked with the services balance. Vértes said it is optimal for Hungary if the external financing requirement is 4-5% of GDP. Even though there is no balance crisis, strict measures must be taken to reduce the budget deficit, he said. (Mti-Eco)