Hungary Debt Level to Rise Temporarily, Sustainable in Long Term

Hungary’s public debt, Prime Minister Viktor Orban’s policy focus, is set to decline in the long term after posting a temporary increase in the middle of the decade, the central bank said.

Public debt may fall to 66 percent of economic output by 2027 from 79 percent at the end of 2012 while rising temporarily in the 2015-2017 period, the Magyar Nemzeti Bank said in a survey today. The survey is based on an assumption of unchanged fiscal policy and is a technical projection, not a forecast, the bank said.

The survey is “unethical” for predicting a rise in the debt level and damages the country’s interests, Economy Minister Gyorgy Matolcsy, a favorite to take over as central bank chief next month, said yesterday.

Orban teamed up with Matolcsy to focus Hungary’s economic policy on cutting government debt and keeping the budget shortfall within 3 percent to end a European Union budget monitoring process, in place since 2004.

Hungary needs faster growth, lower financing costs or further fiscal measures to push the debt level below 50 percent of output, a target enshrined in the Constitution, the survey said.

Hungary’s primary budget surplus, which strips out debt financing costs, is set to narrow through 2013 and improve sustainably afterward to reach 2.1 percent of gross domestic product by 2027, according to the survey.

To contact the reporter on this story: Edith Balazs in Budapest at ebalazs1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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