Josef hírek

2012.06.17. 14:20

Hungary s economy to stagnate in 2012, grow 1.6 pc in 2013, says Matolcsy

Budapest, June 14 (MTI) - The Hungarian economy will stagnate in 2012 and grow by 1.6 percent in 2013, while targeted revenues from the financial transaction tax are more than double initial plans, Gyorgy Matolcsy, the economy minister, said on Thursday.

Budapest, June 14 (MTI) - The Hungarian economy will stagnate in 2012 and grow by 1.6 percent in 2013, while targeted revenues from the financial transaction tax are more than double initial plans, Gyorgy Matolcsy, the economy minister, said on Thursday.

The government initially calculated with growth of 0.1 percent growth this year. Fresh data shows the economy shrank an annual 0.7 percent in the first quarter.

 

The government expects at least 280 billion forints of revenue from its new financial transactions tax as opposed to 130 billion forints earlier, Matolcsy said, presenting the 2013 budget draft.

 

The government has raised both the revenue and the spending side of the 2013 budget by 170 billion forints (EUR 404m), which will keep the overall deficit level at 660 billion forints, or 2.2 percent of GDP, Matolcsy said. On the spending side, 120 billion forints will serve higher spending needs at ministry and state-owned institutions. The Hungary Protection Fund, a buffer against growth risks, will be increased by 50 billion forints to 100 billion forints, he said. The public debt is expected to decline from 78 percent to 76 percent next year, he added.

 

The budget is calculated with a forint rate of 299.4 per euro in 2013, he said.

 

Employment is expected to grow to above 3.9 million jobs next year; this figure includes 300,000 jobs created by the public works scheme, he said.

 

A mandatory retirement age of 62 years will be introduced in the public sector in 2013, with result of 11,000 fewer jobs and savings 20 billion forints.

 

Matolcsy said the government was discussing with the Banking Association the possibility of phasing out the 2010 banking levy next year.

 

Analysts told MTI the unchanged deficit target could be notched up as a positive but the doubling of revenues from the transaction tax would intensify macro uncertainty, while it was unlikely the banking tax could be eliminated.

 

Zoltan Arokszallasi, of Erste Bank, said the government was sticking to a growth forecast of 1.6 percent for next year, but this assumption was a possible source of longer term risk. The doubling of transaction tax revenues is needed to finance planned major growth, but if the government ends up needing even more revenues, it would not be able to scrap the banking levy, he added.

 

David Nemeth, of ING, said the 1.6 percent growth forecast was too optimistic and therefore carried risk, though the government plans to boost budget reserves next year, he noted.

 

The "conservative" exchange rate assumption of 299.4 forints per euro may suggest that the government does not expect the IMF agreement to materialize, though it could also mean extra savings could be generated in the budget if interest rates rise.

 

The main opposition Socialist party said the 2013 budget plan was based on new taxes and hikes to existing ones.

 

Imre Szekeres, the party s economic spokesman, said the introduction of six new taxes and various hikes would impose new burdens on taxpayers. The economy will either stagnate or dip into recession this year, he said.

 

Szekeres cast doubt over whether the projected tax revenues could be raised.

 

The planned withdrawal of funds from health care and education will make it impossible to properly deliver public services, he said.

 

He also said there was no reason why the government should demand that parliament approve the main budget figures this summer, without due preparation. The Socialist politician called on the government to start coordination talks with interest representation bodies and submit the budget to parliament in September, as is customary.

 

The small opposition LMP party said the budget draft was "yet more evidence of the government s failed economic policy".

 

LMP spokesman Laszlo Heltai told MTI that it had become clear that the government planned further austerity measures, and any growth in employment would only be thanks to public works schemes, while the economy would slip into recession.

 

"Matolcsy is still living in a dream world, which rather looks like a nightmare for the country", he said.

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