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UPDATE - 2012 budget bill is stable, predictable and task-centered - Matolcsy

The government's 2012 budget bill is stable, predictable and task-centered, National Economy Minister György Matolcsy told MPs on Wednesday, before the start of general debate of the bill.

Matolcsy said the budget bill implements 82% of the targets set down in the Széll Kálmán Plan, a structural reform program unveiled in the spring.

The bill targets a general government deficit equivalent to 2.5% of GDP, down from 2.94% targeted for 2011. It projects 4.2% annual average inflation and at least 1.5% GDP growth. Household consumption is seen edging up and investments are set to rise about 3%, Matolcsy said.

Matolcsy conceded the growth projection was risky from the fiscal point of view, but said the government would "do everything to achieve economic growth of at least 1.5% but rather more than 2%".

Investment growth will be supported by the payout of some HUF 1,500bn in European Union funding, up from HUF 1,200bn in 2011, as well as by government measures, such as the new Home Creation Program, he said.

This year's deficit target will be met "from extraordinary, one-off sources", Matolcsy said, referring to the transfer of assets of private pension funds to the state. Next year, keeping the deficit under 3% of GDP will have to be done with "our own resources", he added. The structural balance will improve compared to this year too.

The some HUF 300bn in reserves in the budget bill makes planning predictable for 2012, he said. The bill also makes a further reduction in state debt possible, he added.

The interest Hungary pays on its state debt is set to fall to 3.6% of GDP in 2012 from 3.8% in 2011. Excluding debt service, Hungary's general government primary balance would have a surplus of more than 1% of GDP.

The budget bill projects a dynamic rise of exports and imports and a more than one % rise in employment along with a significant fall in the unemployment rate, Matolcsy said. About 200,000 jobs will be established in the government's Start public work program for which HUF 132bn is allocated in the budget, he added.

The 2012 budget divides tasks into five main areas: the stabilization of the pension system and the health fund; the full implementation of the proportional, flat-rate tax system; the establishment of Start program jobs; and the elimination of tax loopholes, he said.

The 2012 budget bill places emphasis on the real economy and puts production and industry in the focus, Matolcsy said. The government supports everything that its local, that is domestic, he stressed.

Matolcsy said the budget bill lays the foundations for a stronger state role on the market, especially in areas where there is no functioning market self-regulation.

He said another important task would be to see Hungary's indebted households and local governments make more savings.