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Assumption Hungary is recovering is "false illusion"

The assumption that Hungary is recovering is a "false illusion", National Economy Minister Gyorgy Matolcsy said at a conference organised by conservative weekly Heti Válasz and the Hungarians on the Market Club on Thursday.

All of the country's macroeconomic indicators are worsening and the economy will enter a state of stagflation this year, Matolcsy said. Thus it is the new government's primary task to prevent Hungary from plunging any further, he added.

The economy is still on the downward path, and a bigger problem in the area of financial stability was narrowly avoided: the extraordinary bank tax and budget savings will allow this year's general government deficit to be brought down from about 5% of GDP to the earlier targeted 3.8%, he said.

The second half of 2010 will bring financial and economic stability and inflation will slow.

Matolcsy confirmed that the government would not budge on the HUF 200 billion the extraordinary bank tax is expected to bring in. The amount is "brutal", but without it, financial stability cannot be achieved, he added.

Hungary could become the fastest developing economy in the region from 2013, if the government can implement stabilization measures this year and a two-year period of reforms thereafter, he said. The following two years will be a period of restructuring, and the government will introduce the simplest tax system in the region in 2011-2012 as part of this, he added. (MTI-ECONEWS)