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Sticking to deficit target will require 1%-1.5%-ofGDP adjustment, Hungarian economy minister says

The government has approved 2010 deficit target contained in Hungary's Fidesz-led government has approved an economic action plan in order to meet the previously established 3.8% of GDP, National Economy Minister György Matolcsy said on Monday evening in Luxembourg. Meeting the target will require a fiscal adjustment to the tune of 1%-1.5% of GDP, he said.

Prime Minister Viktor Orbán will present the action plan to parliament on Tuesday afternoon. Matolcsy, who was in Luxembourg for a meeting of European Union finance ministers, said that the action plan will contain both revenue boosting measures and spending cuts and will also include steps to promote growth.

Matolcsy said that the government has been in continual consultations with the International Monetary Fund regarding Hungary's financial situation. An informal delegation is in Hungary at present, and the talks will most likely continue in the first part of July, he said.

IMF Managing Director Dominique Strauss-Kahn said earlier on Monday he saw little reason for worry about Hungary's financial situation and said the IMF was ready to consult with the new government before the regular review of Hungary's standby agreement due late summer.

The minister of national economy noted that one reason why Hungary has to stick to the deficit target is that financial markets would not tolerate a higher deficit.

The Fidesz government has found elements in the budget which will result in less revenue or more expenditures and the action plan has been prepared partly with the aim to counter-balance these items. The new government expects all revenues, such as corporate and personal income tax revenues, below the budgeted figures, and expenditures such as labor-market spending above what was stipulated in the 2010 budget.

The government will have to make a 1%-1.5% correction to meet the deficit target, he said in response to a question.

The adjustment foreseen by Matolcsy is somewhat higher than the HUF 230 billion (€807 million) or 0.9%-of-GDP discrepancies fact-finding commission lead by Mihály Varga, state secretary at the Prime Minister's Office found when reviewing the 2010 budget. Varga announced the figure on Monday. (MTI-Econews)