Related News:
Hungary Must Forego Stimulus as It Battles Deficit, Economy Minister Says
Hungary can’t use fiscal stimulus to boost growth after the worst recession in 18 years because it must control its budget deficit, Economy Minister Gyorgy Matolcsy said.
“There is no possibility for fiscal stimulus, no possibility whatsoever,” Matolcsy said today in Budapest. “The government can’t even try” to put money into the economy which would “spoil the budget deficit. It’s strictly off-limits.”
Hungary “can’t afford” to delay efforts to narrow its budget deficit, European Union Economic and Monetary Affairs Commissioner Olli Rehn said. Talks with the International Monetary Fund and the 27-member bloc failed in July after the Hungarian government refused to commit to the previous administration’s goal of reducing the shortfall to less than 3 percent of gross domestic product in 2011.
The country is committed to meeting this year’s 3.8 percent of GDP target, Matolcsy said, in a speech to the National Association of Hungarian Industrialists, without giving a budget-deficit goal for next year. The previous Cabinet pledged to reduce the gap to 2.8 percent in 2011. Some investors have said they don’t expect the government to unveil its economic plan until after local elections next month.
‘Pretty Favorable’
“These comments are pretty favorable for the policy outlook,” Janos Samu, an economist at Concorde Securities in Budapest, said in an e-mail. “They contradict some of the previous government’s communications and strengthen the view that it is keeping an eye on local municipal elections on Oct. 3 and intends to show its cards only afterwards.”
The forint traded at 284.24 per euro at 1:01 p.m., compared with 284.28 late yesterday.
Hungary is able to finance its budget deficit from the market through 2013 and won’t ask for a new IMF loan after a 20 billion-euro ($26 billion) credit expires in October, Matolcsy said, adding that the IMF will remain a “strategic partner.”
Hungary will have to rely on EU funds and changes in rules and regulations to boost the economy, which contracted 6.3 percent last year. Matolcsy said the central bank could also stimulate the economy by using monetary tools.
“Unfortunately, the central bank leadership doesn’t share our view that we have a need for monetary stimulus,” Matolcsy said.
He said a planned switch to a flat personal-income tax may have to take place in several stages to protect the budget. The government is “committed” to implementing “structural reforms” in the coming years, Matolcsy said.
Rate These Stories
Rate this Page