Budapest, May 27 (MTI) – Economy Minister Mihaly Varga said in parliament on Wednesday that next year’s budget is based on an economic policy which has proved its strength, giving rise to tax cuts and developments.
Outlining the budget bill at the start of the parliamentary debate, Varga said the 2016 budget was planned for a new period, putting developments at its focal point to fully exploit opportunities while providing the backbone for advances made by families.
He insisted that the tax-cutting budget was far more than a document containing a financial plan. Rather it is the main pillar for the creation of a civic Hungary, Varga said.
The economic growth target of 2.5 percent — which he called a conservative estimate — will bring about extra revenue of 330 billion forints (EUR 1.07bn). The reduction in the public debt, meanwhile, will produce interest payment savings of 75 billion, the minister said.
The government targets a budget deficit of 2 percent and inflation of 1.6 percent, he noted.
Families will be the biggest beneficiaries, since 170 billion forints will be left in the pockets of households thanks to favourable tax measures, including a reduction in the income tax rate of one percentage point to 15 percent, Varga said.
The National Bank of Hungary said in an assessment of the government’s budget bill released on Wednesday that the budget deficit, according to EU accounting rules, could reach 2.2 percent of GDP next year, above the 2 percent target.
The NBH said primary fiscal revenue could fall short of the target by the equivalent of 0.7 percent of GDP, raising the deficit. The main reason for the discrepancy is some 115 billion forints targeted in the bill from “other revenue from the sale and utilisation” of state-owned assets, the central bank added.
The NBH calculated the 2.2 percent deficit assuming the full cancellation of reserves worth the equivalent of 0.3 percent of GDP in the National Protection Fund.
The bank said year-end state debt as a percentage of GDP would fall by about one percentage point next year, calculating with a HUF/EUR 304 exchange rate in the budget bill, but it added that the debt could drop from 75.4 percent to 73.4 percent, calculating with a rate of 315 forints to the euro.
Fiscal Council head Arpad Kovacs told parliament that the target deficit and the targeted debt-to-GDP ratio defined in the bill were achievable. He said the bill’s projected economic growth of 2.5 percent and the 3.6 percent projected increase in consumption were realistic, adding that external conditions had to be favourable in order to achieve the target numbers.
Antal Rogan, the group leader of ruling Fidesz, said the budget ensured more funds for employment, it would continue to decrease unemployment and further boost job creation. Rogan stressed that the budget guaranteed that everyone in Hungary would “pay less taxes next year.” “Every Hungarian family and every worker can take a step forward next year,” he said.
Radical nationalist Jobbik called on the government to withdraw the bill and prepare a different budget. Party leader Gabor Vona said that the budget was “disastrous” in terms of employment and living standards. Vona urged that the VAT on basic foodstuffs and products required for raising children should be lowered, and called for a different tax system that would promote production.
Socialist party leader Jozsef Tobias said the government was not aware of the problems of Hungarians, nor the “good practices of the world” when it drew up the budget bill. Tobias referred to the 2016 bill as an “attack by the government disguised as a budget”. He said “the real crisis” was that four of Hungary’s seven regions were among the poorest in the European Union. Tobias said the budget did nothing to address this issue, and that the government was instead running a hate campaign against immigrants.
Erzsebet Schmuck, the speaker of LMP, said the bill was a budget of “poverty and hopelessness.”
The leftist opposition Democratic Coalition (DK) said the budget was the “budget of deprivation” for education, health-care and those making the lowest wages. Laszlo Varju, the party’s deputy leader, said the real value of the funds allocated to health care was no higher than before, which he said meant that the government does not consider this sector important.
Egyutt lawmaker Zsuzsanna Szelenyi told a press conference that the budget would “undermine the expansion of the Hungarian middle class”. She said the budget did not meet the criteria for a civic Hungary which Varga had outlined earlier.