Finance minister Peter Oszko told MTI Thursday that Hungary’s 2010 general government deficit target of 3.8pc of GDP is feasible if budget discipline is maintained.
The finance minister added that meeting the 2011 target of 2.8pc will require further measures, as mentioned in the government’s convergence program.
Mr Oszko attributed the disparity between the deficit targets of the government and National Bank of Hungary (NBH) to the fact that the latter considers the government incapable of sustaining strict control over spending. The finance minister said, however, that the government proved in 2009 it can meet targets through strict budget discipline.
On Wednesday, the NBH fresh inflation report projected Hungary to post a 4.2pc of GDP ESA95 general government deficit in 2010 which could be reduced to 4.0pc if all reserves in the budget stay frozen. It forecast 4.3pc of GDP for 2011.
Mr Oszko said that strict budgetary measures and a freezing of reserves will compensate for the revenue shortfall stemming from the recent elimination of the government’s planned real-estate tax this year. The finance minister added, however, that the 2011 decrease in the personal income tax will make it impossible to offset the loss of the real-estate tax, thus further measures must be taken to meet deficit targets next year. Mr Oszko remarked that it would be up to the government formed after April national elections to decide whether these measures should be aimed at reducing expenditures or increasing revenue, cautioning that it is vital that they not undermine Hungary’s competitiveness.
Mr Oszko commented that the present government elected to cut expenditures rather than to raise taxes in order to preserve Hungary’s competitiveness.