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Varga: investments, household consumption drive economy

Investments and robust household consumption are expected to drive Hungary’s economy next year, Minister of Finance Mihály Varga told international news wire Reuters in an interview.

Mihály Varga (photo: Ministry of Finance)

Varga said that the government would stick to a budget deficit target of 1% of GDP next year, as a strong fiscal position and buffers are needed at a time when a global economic slowdown looms. Varga also said the forint currency’s recent weakening was due to an outflow of funds from emerging markets.

“The fundamentals of the Hungarian economy would otherwise not justify a weakening of the exchange rate,” he said.

“There are two key elements of growth now which we also see prevailing next year: one is a further growth of investments. And besides investments, barring a very strong external shock, household consumption is expected to continue to drive growth,” he added.

Varga said the government has not yet decided on how to use the buffers, worth 1% of GDP, set aside in the 2020 budget and would have to see how this year turns out first in fiscal terms. He said he does not see room for any additional fiscal incentives, adding that in one or two sectors of the economy there are some signs of overheating, Reuters reported.