EC recommends fiscal adjustment of 0.5% of GDP to Hungary

EU

Hungary should achieve a fiscal adjustment of 0.5% of GDP in 2015 and of 0.6% in 2016 to ensure it reaches the medium-term objective of a structural deficit of 1.7% of GDP by 2017, the European Commission said yesterday in its country-specific recommendations (CSR). 

The EC also recommended that Hungary take measures to restore normal lending to the real economy and remove obstacles to market-based portfolio cleaning. A considerable reduction of contingent liability risks linked to increased state ownership in the banking sector was also advised.

The EC said it would welcome efforts aimed at reducing distortive sector-specific taxes, removing unjustified entry barriers in the service sector, reducing the tax wedge for low-income earners by shifting taxation to areas less distortive to growth, and by continuing to fight tax evasion.

The EC advises Hungary to strengthen structures in public procurement that promote competition and transparency and further improve the anti-corruption framework. It recommends reorienting the budget resources allocated to the public work scheme to active labor market measures in order to foster integration into the primary labor market while improving the adequacy and coverage of social assistance and unemployment benefits.

As a final point, the EC recommends Hungary increase the participation of disadvantaged groups – in particular Roma – in inclusive mainstream education, and improve the support offered to these groups through targeted teacher training. The EC publishes CSRs every spring as part of the EUʼs calendar for economic policy coordination.

The recommendations are tailored to EU members and focus on what can realistically be achieved in the next 12-18 months to make growth stronger, more sustainable and more inclusive.

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