International Monetary Fund (IMF) directors acknowledged Hungaryʼs strong economic growth and reduced external vulnerability, but urged continued fiscal consolidation in an assessment issued Thursday, after a regular Article IV consultation, state news wire MTI reports.
"[IMF Executive Directors] commended Hungaryʼs continued strong economic performance, which has led to faster income convergence towards the European Union average and reduction of vulnerabilities," the IMF said in a press release.
"However, given the increased external uncertainty and Hungaryʼs still high public debt and gross financing needs, Directors encouraged continued fiscal consolidation and supply-side reforms, to further build resilience and sustain the growth momentum," the fund added.
The directors recommended decision-makers reduce exemptions, broaden the tax base, phase out sectoral taxes, moderately reduce spending on goods and services, contain the public wage bill and rationalize generalized subsidies.
They also said "close monitoring" of the housing market is warranted, adding that existing demand-stimulating incentives should be scaled down.
A table of selected economic indicators for the country attached to the release shows Hungaryʼs GDP growth reaching 4.9% this year.
In the latest World Economic Outlook, the IMF had put Hungaryʼs GDP growth at 4.6% for 2019.
Data released by the Central Statistical Office (KSH) late in November show Hungaryʼs GDP rose an unadjusted 5.1% year-on-year in Q1-Q3. Days after the release, Finance Minister Mihaly Varga said Hungaryʼs GDP growth was expected to reach 4.8% for the full year.
The table attached to the latest IMF release projects Hungaryʼs economy will expand by 3.5% next year, over the 3.3% forecast in the October World Economic Outlook.
The table shows Hungaryʼs current-account deficit is expected to widen to 0.9% of GDP this year, before narrowing to 0.7% of GDP in 2020.
In a statement issued after the release of the IMF assessment, the Finance Ministry said the document delivers "full recognition of the results of a growth-friendly tax policy and government measures to support wage convergence, cut unemployment and reduce the vulnerability of the economy."
"Now, when assessing the performance of the Hungarian economy, every international institution acknowledges that the expansion rests on balanced foundations. Lasting growth is not based on overleveraging and privatization, rather the impetus comes from government measures supporting home purchases by families, strengthening the competitiveness of businesses and offering incentives for investment," the ministry said.