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Fiscal Council Head Points to Need for 'Very Disciplined' Budget Policy

Analysis

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The head of the Fiscal Council pointed to the need for maintaining a "very disciplined" fiscal policy, along with continuous monitoring, to meet this year's 4.5%-of-GDP deficit target in a presentation to the Hungarian Economic Association on Tuesday, according to a report by state news wire MTI.

Gábor Horváth noted that Hungary had benefitted from extraordinarily low interest rates in the 2010s, supporting normalisation of interest rate expenditures and contributing to low fiscal deficits and a reduction in state debt. Last year, because of higher interest rates to bring down runaway inflation, the cost of servicing Hungary's debt, relative to GDP, was the highest in the European Union, he said. The same can be expected this year, too, he added.

He acknowledged that Hungary had cut its state debt level by 0.6 pp last year, while state debt levels in ten EU member states had climbed, but pointed out that the level in Hungary was still higher than in all of its competitors in the region.

Citing the Fiscal Council's three-year outlook, Horváth said balance needed to be restored and broad competitiveness reforms carried out for Hungary's GDP growth to stay over 4%. He added that room for increasing the volume of factors that had driven Hungary's economic growth earlier was limited and the focus should be on improving quality in the process of convergence.

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