Economy
Hungary ready for further fiscal adjustment if needed - Cséfalvay
“Whenever it becomes necessary, the government will implement the necessary adjustments to keep the budget deficit below 3% of GDP," Cséfalvay said.
He noted that there is a “serious possibility" that the economy will slip into recession this year, adding that Brussels is unlikely to freeze development funds to Hungary as a sanction in the ongoing Excessive Deficit Procedure (EDP) that is to be moved to the next phase, according to the European Commission’s announcement last week.Cséfalvay had warned before
The last time the government was forced to take additional fiscal steps was in mid-December 2011.
The government made adjustments in the 2012 budget bill because it had to slash its GDP forecast to 0.5% from 1.5% and its EUR/HUF assumption to 299 from 268 previously.
Economy Minister György Matolcsy said the combined impact of these two changes is HUF 320 billion; a hole this size had to be filled by the measures announced last month. However, this package is worth “only" HUF 120 bn.
We need to highlight that it was Cséfalvay who first hinted at the extra adjustment package when he said at the end of November: "Should economic growth drop to below 0.5% then further measures may be required."
If the cabinet sees any fiscal slippage next year, it will not hesitate to take steps to raise more revenue, much like September's excise tax hike, he added then.
Therefore the cabinet can decide - in view of what happened over the past 1-2 months - that it will take further adjustment measures in a bid to meet the deficit goal. Such a move would not be unprecedented given that it took the cabinet two months in 2011 to announce the HUF 250 bn stability reserve fund (spending freeze).
Warning signs in the 2012 Budget
The audit and fiscal committee of Hungary’s Parliament will hold an extraordinary session this Friday (20 January) where the only point on the agenda is the hearing of Economy Minister György Matolcsy regarding the 2012 budget.
Árpád Kovács, the new head of the Fiscal Council, told Portfolio.hu in an interview last week that some additional fiscal adjustments may be necessary during the year because "you need to constantly adapt to the changes of the world."
According to a risk analysis by the Fiscal Responsibility Institute (KFIV) presented last year, Hungary’s adjustment need is around 1.3% of GDP in 2012, i.e. nearly HUF 400 bn.
He noted that there is a “serious possibility" that the economy will slip into recession this year, adding that Brussels is unlikely to freeze development funds to Hungary as a sanction in the ongoing Excessive Deficit Procedure (EDP) that is to be moved to the next phase, according to the European Commission’s announcement last week.Cséfalvay had warned before
The last time the government was forced to take additional fiscal steps was in mid-December 2011.
The government made adjustments in the 2012 budget bill because it had to slash its GDP forecast to 0.5% from 1.5% and its EUR/HUF assumption to 299 from 268 previously.
Economy Minister György Matolcsy said the combined impact of these two changes is HUF 320 billion; a hole this size had to be filled by the measures announced last month. However, this package is worth “only" HUF 120 bn.
We need to highlight that it was Cséfalvay who first hinted at the extra adjustment package when he said at the end of November: "Should economic growth drop to below 0.5% then further measures may be required."
If the cabinet sees any fiscal slippage next year, it will not hesitate to take steps to raise more revenue, much like September's excise tax hike, he added then.
Therefore the cabinet can decide - in view of what happened over the past 1-2 months - that it will take further adjustment measures in a bid to meet the deficit goal. Such a move would not be unprecedented given that it took the cabinet two months in 2011 to announce the HUF 250 bn stability reserve fund (spending freeze).
Warning signs in the 2012 Budget
The audit and fiscal committee of Hungary’s Parliament will hold an extraordinary session this Friday (20 January) where the only point on the agenda is the hearing of Economy Minister György Matolcsy regarding the 2012 budget.
Árpád Kovács, the new head of the Fiscal Council, told Portfolio.hu in an interview last week that some additional fiscal adjustments may be necessary during the year because "you need to constantly adapt to the changes of the world."
According to a risk analysis by the Fiscal Responsibility Institute (KFIV) presented last year, Hungary’s adjustment need is around 1.3% of GDP in 2012, i.e. nearly HUF 400 bn.
