Hungary: FinMin sees end of excessive deficit procedure in 2009

Initiatives

The Finance Ministry expects Hungary’s economy to start improving from 2008 and especially from 2009, when it sees Brussels dropping its excessive deficit procedure against the country, the ministry said on Thursday in a statement on the government’s convergence program report to be submitted to Brussels.

The ministry noted that, because of government measures, Hungary had outperformed government deficit targets in its original as well as its updated convergence program. It attributed the success to stricter control of payments of tax and contributions, a broadening of the tax base, measures against the shadow economy and changes to budget expenditures. The ministry said the reduction in the deficit resulted in equal part from more budget revenue and lower expenditures.

The ministry said the slowdown in Hungary’s economic growth to 1.3% in 2007 resulted from a cutback in state services and contractions in the farm and building sectors. Despite the slowdown, Hungary’s industrial output grew 8.1% in 2007, and the trend looks set to continue. The ministry conceded that steps to boost the employment rate had not turned out as expected because of the slowdown in growth. Unfavorable external effects, such as higher global energy and food prices also temporarily pushed up inflation in Hungary.

The ministry offered an inventory of steps the government has taken to meet the aims in the convergence program, among them reducing staff in the central government by a sharp 27%, making local council financing more efficient, undertaking reforms of healthcare financing which improved the balance of the National Healthcare Insurance Fund, raising the number of Hungarians who make healthcare contributions, carrying out stricter audits of taxpayers, making changes to the system of gas an district heating subsidies and establishing a unified organization to manage the state’s assets.

The National Interest Coordination Council (OET), a forum for the government, unions and employers, will discuss the convergence program report on Friday, after which the ministry will send it to Brussels. (MTI-Econews)

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