Minister of National Economy-designate Gyorgy Matolcsy told the daily newspaper Nepszabadsag in an interview published on Tuesday that Hungary’s economy could grow between 0.5pc-1.0pc this year if the new Fidesz-controlled government is able to implement the initial reforms contained in its three-year tax-cut package.
Mr Matolcsy remarked that the 1pc extra growth would generate more than HUF 100bn (EUR 363.9m) in extra tax revenue.
Hungary’s GDP will contract 0.2pc this year according to the outgoing government latest forecast
The economy minister-designate said that the new government has been conducting informal talks with officials from the International Monetary Fund and European Union, noting that the IMF and EU are awaiting the new economic policy programme. If the programme reflects realities, they will accept a rise in Hungary’s 2010 deficit target (from the official target of 3.8pc of GDP) to a maximum of between 5pc and 6pc of GDP.
Mr Matolcsy told the newspaper that the new government aims to shift the focus of taxation from income to consumption, though would not attempt to introduce a property tax. The economy minister-designate added that the new government would not be able to reduce the current VAT rate of 25pc until the European economy rebounds, which he expects to take place in 2013.
The economy minister-designate said on May 7 that the new government to be inaugurated later this month will either eliminate or consolidate 12 to 16 of Hungary’s 52 current tax categories as part of its tax-reduction program to begin on July 1, adding that the government intends to reduce the total tax burden by about one-third.
Mr Matolcsy told Nepszabadsag that the Fidesz-controlled government plans to reduce the tax burden of businesses first and taxes affecting individuals only thenafter. The aim is for Hungary to get within the lowest 100 among the countries of the world, compared to the country’s current ranking of 151 in this category.
Mr Matolcsy said that he believes National Bank of Hungary (NBH) has made serious professional mistakes since 2003 through allowing the rapid expansion of foreign currency denominated lending and focusing solely on inflation. The biggest mistakes in monetary policy happened since October 2008, he said. He noted that governor Andras Simor (who took over as NBH president from Zsigmond Jarai in 2007) could not held alone responsible for the monetary policy, which is formulated by the monetary council, implying that all the council’s member should resign.
The economy minister-designate commented that he is also dissatisfied with the operations of financial-market regulator PSZAF and all other government financial organizations.
Mr Matolcsy said the Fidesz-controlled government will initiate talks over the coming months with all major public-utilities companies operating in Hungary about containing prices, declining to discount the possibility of establishing a price-hike ceiling for public utilities at the inflation rate.