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As many as ten years needed before Hungary's state debt falls to level of peers

Hungary needs 8-10 years of strict fiscal policy and an annual trade surplus of close to 4% of GDP to bring its external state debt to the level of other countries in the region, National Bank of Hungary governor András Simor said at a presentation to students of Budapest's Corvinus University.

“There is no quick solution to the problem,” Simor said. “It will be a very long march.”

Simor said it could take ten years until the Hungarian economy reaches the level at which its neighbors are at now.

Simor said labor market activity, the scale of investments and technological development influence Hungary's growth path. Technological development is not a problem, but labor market participation and the size of investments were lower in Hungary than in other countries in the region even before the crisis, he added. Workforce participation has improved in the past year, thanks to government measures, but the introduction of crisis taxes could reduce the propensity to invest in the country, he said.

Higher workforce participation could offset the inflationary effects of economic growth, he said. If prices stay low, Hungary's risk premia will fall, he added. (MTI – Econews)