Hungarian PM says growth rate will pick up in 2009

Parliament

Hungary’s economy will grow faster in 2009 or 2010 once the current period of economic adjustment has been completed, Prime Minister Ferenc Gyurcsány said on Thursday after figures showed that growth had dropped to an 11-year low.

The Hungarian economy grew by an unadjusted 1% in the Q3, the Central Statistical Office (KSH) said on Wednesday. Over the last few years Hungary has enjoyed annual growth of around 4%, but tax hikes, energy price increases and other measures aimed at cutting the budget deficit have taken their toll. The Q3 figure was even lower than the second quarter’s 1.2%, bringing growth over the first nine months of the year to 1.6%. “We are now paying the price of what we did between 2001 and 2006,” said Gyurcsány, referring to poor fiscal discipline during the period.

Speaking after meeting Angel Gurria, secretary general of the Organization for Economic Cooperation and Development (OECD), the prime minister said he was committed to his reform. “There is no growth unless we dare to change,” he said. The government is attempting to reduce its budget deficit, which, at 9.2% of GDP in 2006, was the highest in percentage terms in the EU. Bodies such as the OECD had long been calling for Hungary to address the problem before the government acted, and Gurria said that a sustainable fiscal policy was key to economic growth. “No country can achieve economic growth if the state’s financial position is unstable or if its debt is growing,” he said.

Main centre-right opposition party Fidesz, however, criticized the government for leading the country into a slump, pointing out that Hungary now had the lowest growth in the European Union. “The Gyurcsány government has turned Hungary into Europe’s straggler,” Fidesz deputy chairman and former finance minister Mihály Varga said.
Many of Hungary’s regional neighbors are seeing growth figures of between 5 and 10%. Growth in the EU as a whole is expected to hit 2.9% in 2007, although Brussels is predicting growth will drop to 2.4% through 2008 and 2009. (m&c.com)

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