Hungary will record a much higher deficit than foreseen in the 2010 budget and should conclude a new agreement with the IMF when the present one expires next October, Fidesz former economy minister György Matolcsy said yesterday.
Addressing a National Employers and Industrialists Association gathering, he said Fidesz should expect no growth in Hungary’s export markets in the next two or three years, and that temporarily crises are possible.
In addition, Matolcsy continued, the next government will have no room for manoeuvre in the budget, not only due to the agreements with the IMF and the EU, but also because of the limited possibilities of financing from the market, Matolcsy said.
Echoing party leader Viktor Orbán, he said the 2010 budget deficit target of 3.8% GDP is not realistic and cannot be met. A deficit of 7.3-7.5% of GDP is “already in the figures” he claimed, as Ft 1,300-1,400 billion of expenses that are already known about are not included in the budget, such as losses at state-owned companies and local governments. Budget revenues may be slightly lower than planned, but reserves will be sufficient to cover that, he added.
The budget will not provide economic incentives, but monetary policy measures, such as a lower interest rate can play that role, Matolcsy said. Money now in two-week deposits at the National Bank should be redirected to the economy, and banks should be urged to provide loans, he said.
Matolcsy argued that a new IMF agreement should be based on reforms, including cuts to state administration and bureaucracy, the reform of the Budapest public transport company and state railway company MÁV, as well as changes to social security funds and local governments, while tax and social contributions should also be overhauled. Steps should be taken to develop skilled labour and fight corruption, he added.
Fidesz sees four potential breakthrough areas to boost the economy in the export of healthcare services, the green economy, the auto industry and business services. Adopting the euro also will have priority, Matolcsy said.