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EC: Hungary’s economic growth attributed to short-term stimulus measures

MNB

Although Hungary’s economy was the fastest growing in the EU in Q2 2014, it was partly due to “the substantially increased absorption of EU funds at the end of the seven-year programing cycle” and “short-term stimulus measures (such as the Hungarian Central Bank's Funding for Growth Scheme, cuts in regulated utility prices as well as the continued expansion of the Public Works Scheme)”, the European Commission’s sixth Post-Program Surveillance mission to Hungary concluded.

The abatement of these stimuli is reflected in the Commission’s projected, slowing, growth. “The government debt is not yet on a firm downward path and that based on the Commission's 2014 autumn forecast, the projected pace of debt reduction appears at risk of breaching the requirements of the Stability and Growth Pact”, the report stated.

The mission underlined that there are “important concerns regarding the substantiation of a number of revenue-increasing measures contained in the 2015 draft budget”. The Commission stressed that “substantial state ownership in the banking sector has the potential to expose public finances to a contingent liability”. The report also concluded that there is a “clear need for more predictable and competitiveness-oriented policies”.

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