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Hungary: 2009 tax cuts only after June 30

Analysis

Finance Minister János Veres on Friday said the government will decide on the scale of tax and payroll tax reductions planned for next year only after June 30, when H1 budget figures are known.

Veres said the January-June general government deficit is likely to be under the pro rata target, and the full-year deficit will be within the 4%-of-GDP target range. He added that Hungary’s improved balance, faster growth and slowing inflation rate show the most difficult part of budget reform measures is over. Veres urged caution when estimating the effect an expected expansion in the farm sector will have on growth this year, adding that still saw no reason for the government to modify its 2.4% GDP growth forecast. Some foreign analysts have said a big grain harvest of 16 million tons could boost farm sector growth as high as 43%, lifting GDP growth to 4-5% in 2008. Veres said the government does not plan to slow down or halt state investments, noting that doing so could cut GDP growth by a full percentage point. Veres said the firming forint shows investor confidence in Hungary is improving and the country’s fundamentals are getting better. (Mti-Eco)

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