Budapest (MTI) – With oil prices steadily low, Hungary’s economic growth in 2015 could exceed government projections by half a percentage point, Economy Minister Mihaly Varga said in an interview to MTI on Thursday.
Varga said, however, that the Ukrainian crisis poses a risk to output and the government would not review its projection before it submits its euro convergence programme update.
He said it was cause for optimism that growth and budget trends were in line with plans in the base year.
The 2015 budget is planned conservatively and the negative effects of the Russian embargo are built into growth projections, he said. Alternative scenarios are also presented in the budget, he added.
Varga said the budget deficit in 2014 would be 2.7 percent of gross domestic product (GDP), lower than the 2.9 percent expected earlier, which is especially noteworthy, since last year was an election year. The rate of inflation is reminiscent of the 1960s, when in 1963 inflation was 0.7 percent. Public debt, too, will be keep on a declining track, he said.
If the price of oil remains as low as 60 dollars per barrel, growth could add half a percentage point and households will have more money to spend while businesses make more profit, he said. The positive effect could be endangered by the weakened Russian economy and the ensuing fall in exports, but Hungary’s external financing capacity will remain strongly in positive territory, he added.
Hungary fared well on its quarterly macroeconomic data in a European Union comparison, and the future will be about securing long-term growth, Varga said. The fact that in 2010-2014 Mercedes and Audi expanded their capacities in the country is a positive development, and it is hoped this trend will continue in 2015. These companies provide work for many thousands of Hungarians and help boost growth.
Hungary’s GDP grew by 3.1-3.2 percent in 2014, according to estimates. EU funding is used towards economic development, but exports, industrial output and domestic consumption all helped growth, Varga said. The combined effects of job creation, real wage growth and low inflation have helped boost growth and had a benign effect on the budget, he said.
The most important event in economy in the New Year will be bank-client settlements whereby mortgage repayments could drop by 25-30 percent, he said. Phasing out forex loans from the market will be advantageous to borrowers, banks and the country. “We are set to end a decade-long problem here,” he said.
The online goods tracking system to launch on Jan. 1 is hoped to help combat the black economy. All businesses engaged in road haulage will have to register their shipment in a central electronic database prior to shipping. The system is set to strengthen the positions of market players who follow rules, while making turnover transparent and screening for unhealthy food items and tax evasion, Varga said. The state expects to stop black-market shipping worth billions of forints in unpaid tax, he added.