View Full Version : Hungary Expects Exit FHungary’s government expects to exit rom EU Budget Monitoring Without Measures

04-16-2013, 11:56 AM
Hungary Expects Exit From EU Budget Monitoring Without Measures

Hungary’s government expects to exit the European Union’s monitoring process for budget offenders without further fiscal measures as a return to growth and favorable risk perception allow a cut in budget reserves.

Hungary can reduce the reserves to 0.6 percent of gross domestic product from 1.3 percent, Economy Minister Mihaly Varga told reporters today in Budapest as he presented the country’s euro-convergence plan. The government cut its 2013 growth forecast to 0.7 percent from 0.9 percent. That compares with a 0.1 percent contraction projected by the European Commission. The economy will expand 1.9 percent in 2014, Varga said.

Prime Minister Viktor Orban’s priorities include ending a recession and keeping the budget shortfall below the EU limit of 3 percent of GDP to remove the threat of cuts in the bloc’s funding. The commission forecast a budget gap of 3.4 percent in 2013 and 2014. Hungary has kept the gap within the threshold the past two years and will do the same this year, Varga said.

“Hungary is on a sustainable path, so we have all reason to expect that we’ll emerge from the excessive deficit procedure,” Varga said. “The convergence program is based on the projection that economic growth will resume in 2013, the Hungarian economy will stay on a balanced path, we’ll achieve a budget deficit below 3 percent and no additional measures will be needed for that.”

Forint, Bills

The forint weakened 0.2 percent to 295.26 per euro by 1:10 p.m. in Budapest, extending this year’s loss to 1.3 percent. The government calculates with an average forint exchange rate of 293.1 per euro, rather than 283 per euro earlier, according to the report.

The state sold a planned amount of 3-month Treasury bills at an auction today as the average yield declined to a record- low 4.34 percent.

Hungary is one of the “promising” countries that may receive abrogation from the excessive-deficit procedure “in the course of this spring,” EU Economic and Monetary Affairs Commissioner Olli Rehn said Feb. 22.

Orban, who faces elections next year, sacrificed growth to preserve access to EU grants, which finance 95 percent of all development projects in the country, the highest proportion in the bloc, according to the government. Extraordinary industry taxes in the past two years helped push the economy into its second recession in four years in 2012.

The government cut its 2013 inflation forecast to 3.1 percent from 5.2 percent, mainly as a result of mandatory cuts in household-energy prices and subdued domestic demand, Varga said. The rate fell to 2.2 percent last month, the lowest since 1974. The central bank, which targets 3 percent price growth expects an average of 2.6 percent this year and 2.8 percent in 2014.

The loss in budget revenue resulting from weaker growth and slower inflation as well as an expected decline in revenue from a financial-transaction tax will be offset by more restrained spending at local councils and a decline in debt interest payments, the report said.

To contact the reporters on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net; Edith Balazs in Budapest at ebalazs1@bloomberg.net

To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net; Balazs Penz at bpenz@bloomberg.net