Hungary says Economy Near Turning Point after Austerity Package

May 30, 2008
Budget deficit as percentage of total economic output will be less than 4%

With the budget deficit likely to come in above target this year, Finance Minister Janos Veres said on May 29 that the Hungarian economy is approaching a turning point. Veres said the budget deficit, as a percentage of total economic output, should be less than the 4% target this year while planned 0.5% real, inflation adjusted income growth was also feasible.

He said he was counting on substantially faster economic growth and slower inflation, to grow investments.

Last year, real incomes dropped 6% due to austerity measures introduced by the governement in order to fight the EU's biggest deficit. This led to lower household consumption, which together with tax hikes contributed to slower economic growth.

The budget deficit hit a record 9.2% of Gross Domestic Product in 2006, falling back to 5.5% in 2007, according to official figures.

Economic growth fell to 1.3% in 2007 from 4% in 2006 while inflation rose to 8% from 3.9% over the same period. The Hungarian central bank raised its key interest rate by 0.25 percentage points to 8.5% on May 26.

Copyright Agence France-Presse, 2008

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