Hungary’s government on Wednesday endorsed the 2010 budget bill which provides for a deficit target of 3.8pc of GDP, Prime Minister Gordon Bajnai announced on Wednesday.
Mr Bajnai said the budget bill was strict and frugal but contained extra financing in a few areas.
Due to the effects of the global economic crisis, Hungary was limited to a “narrow field” where the economy would contract by 7.5p cin 2009 and 2010 while the budget shortfall must be kept below 3.8pc of GDP next year, requiring restraint in spending.
Next year’s budget, however, contains tax cuts and, if the right conditions prevail, reduced tax for heat used used by district heating distributors, he said.
Although the budget will make cost-savings, it can still lead Hungary back to the growth path. The budget’s most important tasks are reinforcing public security, undertaking developments and creating jobs.
State funding for the Road to Work programme is expected to grow by HUF 13bn and the programme will enjoy HUF 7.5bn more from the EU in 2010. Funding for public security will rise by 8pc, or HUF 23.5bn, in 2010. Spending on healthcare will grow by HUF 15bn to HUF 730bn, while the spending of healthcare institutions will fall by HUF 18bn because of the reduced payroll contributions.
The most important elements of the 2010 budget are tax cuts that will lay the foundation for creating new workplaces and spurring growth, Mr Bajnai said. Hungarian companies will save HUF 400bn in 2010 because of the reduction in contributions, he added.
The 2010 budget allocates HUF 700bn in development spending, much of it from the EU. Local council developments paid for solely with domestic resources must be suspended for one year, but there will still be co-financing for EU-supported projects.
Local councils will have about HUF 120bn less to spend in 2010 Mr Bajnai said. In reality, this translates as net HUF 85bn in cuts, because of extra funding for the Road to Work programme and to reinforce public security, as well as because of savings resulting from the lower number of school-goers.
Local council support will fall 4.8pc in 2010, but municipalities will have fewer tasks and more liberty to control their own operations.
The government will reallocate HUF 111bn for direct support for SMEs because of the crisis.
The budget ensures that Hungary’s standard of education is maintained, Mr Bajnai said.
The budget will be submitted to Parliament on September 11.