Avoiding recession in 2012 hard but realistic, says Orban

Avoiding a recession in Hungary next year is a realistic goal but will not be easy, Prime Minister Viktor Orban said at an event late on Tuesday, broadcast by commercial news channel HirTV.

Mr Orban said legislation underpinning the transformations under way is expected to be completed by the end of the year, laying the foundations for the attainment of set goals.

The task for 2012 will be to get new systems up and running and to start a period of consolidation, Mr Orban told an event organised by the Szell Kalman Foundation.

He said the transformations - which were bigger in scale than those at the time of the regime change - aimed at boosting the rate of economically active Hungarians from 55% at present to 75%.

Mr Orban said in order to prevent the economy from sinking into a recession in 2012, "the effects of the euro crisis should be prevented from permeating Hungary’s borders." To meet this end, state debt must be reduced and growth boosted, he added.

Mr Orban said Hungary must continue to apply its own economic and political strategies.

“We must put in use a growth strategy built on Hungarian peculiarities and resources. Perhaps I’ll disappoint some, but in my opinion no international growth strategy exists today, only national growth strategies do,” he said.

He added that the growth strategy would be drawn up along three lines: financing, production and attracting foreign investment.

In terms of financing, he said government talks with banks were progressing well and agreement on the role of banks in financing the economy in 2012 was in the pipeline. He said the bank levy and sectoral crisis taxes would be "put out" of the system soon.

"We introduced them for three years and we will take them out at the end of 2012. The crisis taxes in any case and the bank levy too - as we said earlier - in a way that brings it to a level in line with the general burden presented by European bank levies at the end of 2012. That is about half of the burden at present," Mr Orban said.

Production will focus on industrial development and agriculture, he said, adding that there could be no growth without foreign capital.

Mr Orban said that in 2011 some HUF 1,280bn had been "left with entrepreneurs, in the economy and with families." This includes HUF 600bn from adjustments to the tax system, HUF 260bn from real yields paid on private pension fund assets, HUF 150bn from cutting the corporate profit tax and HUF 270bn from - originally unintended - VAT refunds, he said.

The state must pay the VAT refunds under a recent European Court ruling.

In 2012, an unprecedented HUF 1,400bn worth of readjustments in the budget will take place, he added.

Hungary’s budget deficit is expected to remain below 3% of GDP with special measures in 2011 and without such measures in 2012, Mr Orban said.