Varga: 2017 deficit could speed up economic growth

“Consolidation has been a key consideration until now: balancing the budget and the economy, creating stability and phasing out FX loans. Weʼve completed this task. Today, we need to focus on how growth can be more sustainable, faster, and what resources are available to expand the economy,” Varga told the daily.

The Hungarian government is targeting a 2.4%-of-GDP government deficit for next year, an increase from this year’s 2% gap. Varga reportedly said that the deficit is likely to fall in the coming years, and as long as the country’s GDP growth remains over 3% and its fiscal deficit under 2.5%, the level of state debt as a percentage of GDP will also fall, due in large part to Hungary’s lower interest rates.

Varga also addressed his earlier statements regarding bringing the personal income tax rate down into the single digits. “A single-digit PIT rate would create a HUF 600 billion budget revenue shortfall. If the pace of economic growth does not change, and if the scale of the state apparatus can successfully be reduced through the consolidation of institutions, then the room for manoeuver could reach this amount.

Regarding the sale of stakes in Erste Bank Hungary to the state, Varga said the deal has yet to be closed and is contingent on the completion of due diligence and the parties reaching an acceptable price, according to the paper.