Economy
IMF, EU not to tolerate 7.0% of GDP deficit in Hungary
James Morsink, head of the International Monetary Fund (IMF) mission, which held discussions with the Hungarian authorities during November 4-16 in Budapest, told a press conference today that they “could not tolerate an economic policy that would lead to a deficit of over 7%".
There are risks to the achievability of next year’s budget deficit target, but once you calculate realistically (excluding extreme scenarios) and assume that the massive reserves embedded in the budget will be tapped wisely, the 3.8% of GDP target can be met, Morsink added.
The 2010 deficit greatly depends on what economic policy the given government will pursue, he said. Morsink stressed that the need to reduce Hungary’s government debt in the medium term requires tight fiscal policy and that is also necessary to meet the 2010 deficit goal.
He also noted the IMF would not accept an economic policy that would result in the general government deficit running up to around 7% instead of around 4%.
With regards to the risks to the 2010 deficit, Iryna Ivaschenko, resident representative of the IMF, said it is yet to be seen what outcome the reduced government subsidies for local governments and the state-run railway company MÁV will bring about. She also noted there are some downside risks to corporate tax revenues (i.e. these could fall short of the target).
Barbara Kauffmann, European Commission head of delegation to Hungary, said she did not understand why Fidesz would want to let the deficit run away next year in an improving economic environment. Under such economic conditions the European Commission does not see why it should accept or support measures that would lead to a deficit of around 7% of GDP.
There are risks to the achievability of next year’s budget deficit target, but once you calculate realistically (excluding extreme scenarios) and assume that the massive reserves embedded in the budget will be tapped wisely, the 3.8% of GDP target can be met, Morsink added.
The 2010 deficit greatly depends on what economic policy the given government will pursue, he said. Morsink stressed that the need to reduce Hungary’s government debt in the medium term requires tight fiscal policy and that is also necessary to meet the 2010 deficit goal.
He also noted the IMF would not accept an economic policy that would result in the general government deficit running up to around 7% instead of around 4%.
With regards to the risks to the 2010 deficit, Iryna Ivaschenko, resident representative of the IMF, said it is yet to be seen what outcome the reduced government subsidies for local governments and the state-run railway company MÁV will bring about. She also noted there are some downside risks to corporate tax revenues (i.e. these could fall short of the target).
Barbara Kauffmann, European Commission head of delegation to Hungary, said she did not understand why Fidesz would want to let the deficit run away next year in an improving economic environment. Under such economic conditions the European Commission does not see why it should accept or support measures that would lead to a deficit of around 7% of GDP.
