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Hungary: Researcher backs alternative reforms

  Kopint-Tárki Director Éva Palócz said that the Reform Alliance’s proposed decrease in the level of state redistribution from 50.5% of GDP to 42.1% by 2013 is aimed at making the necessary reductions in state expenditures and redistribution to revive economic growth.

The Reform Alliance commissioned economic research institute Kopint-Tárki to asses the effects of its economic-reform proposals. According to the Kopint-Tárki study, the Reform Alliance’s proposals would generate moderate economic growth beginning in 2011 and growth of 1.5% in 2013.

Ms Palócz said that she was surprised by a government analysis estimating that the Reform Alliance proposals would cause Hungary’s economy to contract by 0.5% in 2009 and 2010 and 1% in 2011.

Ms Palócz added that the government analysis may ignore the fact that implementation of the Reform Alliance proposals would significantly improve the credibility of Hungary’s economic policies, confidence that would underpin growth potential and make Hungary more attractive for the foreign investors and reduce the country’s risk premium on foreign debt.

Ms Palócz added that she will hold consultations with the Finance Ministry on Thursday on behalf of the Reform Alliance regarding the proposals.

Ms Palócz said that a contraction of over 3.5% in Hungary’s GDP this year could eliminate the portion of the Reform Alliance’s proposed HUF 355 billion in 2009 expenditure cuts that are not aimed at filling gaps in the central budget, but at counterbalancing tax cuts.

The Reform Alliance has proposed using HUF 210 billion generated from government expenditure cuts to plug holes in the government budget and HUF 140-150 billion generated from the cuts to support tax cuts.

Ms Palócz commented that some elements of Reform Alliance’s economic-reform package, such as the property tax, could not be implemented this year, noting that this tax would result in six-month revenue of HUF 30 billion and one-year revenue of HUF 60 billion. (MTI-Econews)