IMF welcomes Hungary’s strong economic performance, but calls for structural reforms

Budapest (MTI) – Executive directors of the International Monetary Fund (IMF) have praised Hungary for its continued strong economic performance but noted that the still high external and public debt levels call for rebalancing the policy mix and advancing structural reforms, in a statement issued on Friday.

The IMF encourages the authorities to pursue growth-friendly consolidation for faster deficit and debt reduction. Priority should be given to enhancing the quality of expenditure and composition of revenue while a gradual reduction in the elevated wage bill could be part of a comprehensive administrative reform to rationalize and better target subsidies.

In its statement, the IMF welcomed an improvement in tax compliance and encouraged action to further improve revenue by reducing exemptions and the number of items subject to preferential VAT rates.

The directors supported the current monetary policy stance, but highlighted the need to monitor inflationary pressures. With the economy and the banking sector improving and new lending resuming, the usual monetary policy transmission mechanisms are likely to be restored.

The fund recommended a gradual phasing out of unconventional monetary and credit policies and calls for sustained efforts to strengthen the financial sector and reduce risks, especially monitoring of risks from higher real estate prices. The statement added that enhancing the business environment by streamlining regulations and improving transparency and policy predictability remain a priority. Measures to increase female participation will also be helpful. Directors underscored that ensuring effective utilization of EU funds will be key to supporting growth.