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Analysts say government proposals moving in the right direction

Analysts polled by MTI said the reform proposals that Hungarian Prime Minister Ferenc Gyurcsány announced on Monday represent a move in the right direction, though they will not provide the Hungarian economy with a short-term boost.

CIB Bank's Mariann Trippon characterized the proposals as “positive steps in the right direction,” adding that at the government does not have much more room to maneuver at present. Trippon said the tax reform and the lowered payroll tax would ease the affects of the economic slowdown, but these will not resolve the problems in themselves. However, further reforms based on the current changes could contribute to the improvement of Hungary's competitiveness.

Ádám Keszeg of Raiffeisen Bank said the steps, especially those towards a linear tax system and reducing payroll costs are significant ones, but the announced reforms will not be enough to rescue the economy.

Keszeg added that the tax reform will not affect the budget deficit in 2009 and 2010. Keszeg said that the HUF 200 billion – HUF 220 billion reduction in budget expenses is designed to compensate for the lower GDP expected in 2009.

Kopint-Tárki director Éva Palócz said that details surrounding the budget expenditure decreases of HUF 550 billion in 2010 and HUF 650 billion in 2011 are still not known, adding that the announced changes in family subsidies and pensions will not cover these reductions.

Palócz said eliminating the extra month's pension or salary and a few other minor changes could largely cover the planned reduction in budget expenditures. (MTI – Econews)