Hungary looked likely to achieve stringent cuts to its budget deficit in the short-term but should focus on executing its budget plans, the Organization for Economic Development and Cooperation said on Tuesday.
The government was attempting to cut the huge budget deficit, which at 9.2% in 2006 was by far the largest in the European Union. It introduced an austerity package, which raised taxes, hiked energy prices and brought in reform in healthcare and other areas. A report by the OECD said the measures were largely working, and the deficit was likely to come in below the original 2007 target of 6.8% - the new target was 6.6% - and the 2008 deficit would be around the official target of 4.3%. However, the OECD warned that Hungary's general elections in 2010 presented a longer-term threat and would lead to pressure for more public spending. It called on the government to stick to its plans and not be tempted to loosen the purse strings. The budget deficit in Hungary has historically shot up in election years as the government attempts to woo voters. “Budget consolidation is the key challenge for the Hungarian economy,” said Andrew Dean, who led the OECD's visiting mission, at the press conference. “It's extremely important to break this pattern of pre-election spending. Fiscal consolidation could minimize the uncertainty.” The report said Hungary needed to increase employment, which was below the OECD average, simplify local government, raise the retirement age and cut maternity leave from the current three years. (eux.tv)