Hungary to freeze public spending in 2008, except for social benefits


The Hungarian government plans to largely freeze public spending in 2008, except for some social benefits, in a bid to steer the economy back towards sustainable growth and bring it closer to euro accession criteria, the government said in a circular on planning the 2008 budget on Thursday.

“Except for some areas, such as pensions, family benefits, social aid, state obligations and EU co-financing, there is no room to increase spending in 2008,” according to the document, which provides a guideline to ministries on planning the 2008 budget.

Hungary launched a series of austerity measures aimed at restoring economic balances last year, when it racked up the largest deficit in the EU in terms of GDP, at 9.2%. This year, the deficit is seen being cut to 6.4% of GDP, while Hungary's convergence program foresees a reduction to 4.3% next year. “With a reduction in state spending, and an increase in revenues in the initial phase [of austerity measures], the conditions will be created by the middle of the current government cycle [of 2006-2010] for sustained economic growth, as well as for joining the euro zone,” the government said.

Macroeconomic data also indicate that the Hungarian economy is on a path in line with the targets set down in the convergence program of December 2006, the document added. Based on this, the government calculates with a pickup in economic growth in 2008, and further growth in 2009 to a level of above 4%, while inflation is set to decline from around at average 7% this year to 3.5% in 2008, and further to 3% in 2009. (

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