“The growth trajectory is also sustainable according to international feedback, meaning the Hungarian economy is expected to increase by around 4 percent both this year and next year”, Minister of Finance Mihály Varga said on Tuesday on InfoRádió.
“The growth of the Hungarian economy, which has been ongoing since 2013, is also being supported by the external environment”, he added.
The Minister called the 2019 budget the “budget of secure growth” in view of the fact that reserves will be fifty percent higher than last year, exceeding 300 billion forints (EUR 920 million). “This enables economic intervention, the launching of programmes or the provision of support to enterprises if required”, he added.
The budget was planned with a forint exchange rate that was better than the current one, but according to Mr. Varga the weakening of the forint is not endangering the population or the budget balance, inflation remains under 3 percent and the price of oil is also not critical, meaning no government intervention is expected. He stressed, however, that the Central Bank is monitoring developments and can count on the government’s assistance if required.
Highlighting the target of full employment and the expansion of family support, the Minister said helping public work employees enter the job market, increasing tax allowances for families with two children, and the provision of additional funding for healthcare and education were all important measures included in next year’s budget, adding that the inclusion of the latter two are also justified in view of the fact that the economy can only grow parallel to improving state services.
“The Government did not choose austerity methods as a method of reducing sovereign debt, but following the example of South Korea and Taiwan it trusted in the fact that the Hungarian economic is capable of growing enough to solve this issue”, he said.
He also said that the Government is not currently planning any further reduction in the rate of personal income tax, but is not excluding the possibility of introducing a single digit income tax in future.
“The VAT allowance on the construction of new housing that was introduced until the end of 2019 will also not be extended, in view of the fact that this was a temporary measure and the Government made no irresponsible promises to the contrary”,
the Minister said. “Many utilised the allowance to realise property investments, whereas the aim of the measure was not this, and certainly not to make real estate more expensive, but to facilitate home creation, and accordingly an expansion of home creation benefits can be expected instead”, he explained.
According to Mr. Varga, employers have also been calling for the simplification of flexible employee benefit regulations for a long time, and the Government would like to reorganise the system to ensure that it facilitates economic development to the highest possible extent. He explained that the best affect can be expected from the utilisation of hotel and restaurant services and leisure activities, but that the new regulations cannot lead to a reduction in employee benefits or an increase in employer contributions.
The Finance Minister rejected the proposed reduction of EU agricultural and cohesion funding and said the planned distribution ratios were disadvantageous to Central Europe.
“Europe must help those who are also capable of helping themselves, and cohesion resources should not be spent on supporting migration”, he added.
He said that if necessary, the Government is even prepared to veto the plan for the new distribution of EU resources, but added that he hopes this will not be necessary in view of the fact that other member states are also rejecting the European Commission’s proposal.
According to Mr. Varga, Hungary is capable of standing on its own two feet even without EU funding, although their injection into the economy does significantly facilitate development. He also stated that the Hungarian economy is at no risk with relation to internal dangers, but could be affected by the slowdown of the German economy and the emerging trade war between Europe and America.