The Hungarian economy is set to slow down sharply this year with growth of 2.2% after 4% last year, the OECD said on May 22, praising measures to cut government overspending even though they are crimping expansion in the short term. The OECD said that reduction of the public deficit was essential and would boost the economy eventually.
Hungary's fiscal deficit, or excess of expenditure over tax revenue, reached 9.2% of gross domestic product in 2006, as a result of which debt has reached 66% of GDP
And it also said that the country, which joined the European Union in May 2004, was paying a price for delaying its entry into the eurozone precisely because of the deficit. Hungary has abandoned its 2010 target for entry into the eurozone because of its problems with the budget deficit, and it has not yet committed to a new target date.EU rules require EU countries to prepare for membership of the eurozone. The rules state that the public deficit, covering central government, social security and local authority budgets, must not exceed 3% of output. The rules also state that the debt, of accumulated past deficits, should not exceed 60% of output or be falling consistently towards, and then below, this figure.
The OECD forecast that gross domestic product would grow 3.1% in 2008.
Copyright Agence France-Presse, 2007