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Central bank sees overly optimistic elements in 2011 budget draft

The National Bank of Hungary believes several elements of the 2011 budget draft, among them the mid-term projections for economic growth and the expansion of employment, are too optimistic, deputy-governor Ferenc Karvalits told Parliament's budget committee on Wednesday.

This year's and next year's deficit targets are achievable, but the structure of the budget and fiscal sustainability raise worries, Karvalits said.

he end of temporary measures to raise revenue could result in a growing budget gap from 2012, he said. To cut the deficit, expenditures must be reduced, he added.

When the effect of assets brought by mandatory private pension fund members to the state pension system is over, the budget will be left with a HUF 700 billion hole, causing the deficit to jump back to near 5-6% of GDP, Karvalits said.

Karvalits said it was worrisome that the government projects mid-term CPI over the central bank's inflation target. (MTI-ECONEWS)