Hungary wants to convince its creditors including the International Monetary Fund to approve measures to boost economic growth as part of a new agreement, premier-in-waiting Viktor Orban said.
The IMF-mandated budget-deficit target for this year is unsustainable, Orban said at a press conference in Budapest today after his party won a constitutional majority in yesterday’s second round of elections. Hungary needs to cut taxes and trim the state bureaucracy, Orban said. He didn’t detail his plans further.
Hungary in 2008 became the first European Union country in 32 years to receive an international bailout as capital flows died up, pushing the country to the brink of default. Orban, returning to power after eight years, pledged to jumpstart growth and create jobs after the country’s worst recession in 18 years, which was exacerbated by the loan’s conditions.
“I don’t think the IMF and EU’s financial institutions are our bosses,” Orban said. “I’m convinced that we can agree with the IMF on the content of such a mid-year package.”
Orban said that the new government will have to review the budget before proposing a multi-year plan to reduce the debt level, which is the highest of the EU’s eastern members. The deficit is set to overshoot the IMF-approved 3.8 percent of GDP target for this year, he said.
‘Belongs in the Past’
“That number belongs in the past,” Orban said. “We don’t want to raise the deficit, we want to bring it down.”
Fidesz plans to focus on growth instead of meeting the deficit goal. The European Commission estimates this year’s shortfall at 4.2 percent of GDP. The party has accused the government of lying about the size of the gap.
Generating growth is a pre-requisite for fiscal consolidation and may help limit public support for radicals, who posted their biggest electoral gains since communism fell in 1990, Orban said on April 12.
“The biggest question is whether Fidesz can strike a deal with the IMF,” Gyorgy Barcza, an economist at KBC Groep NV in Budapest, said in a phone interview. “If Fidesz pledges to overhaul the economy, the IMF in exchange may allow bigger tax cuts.”