Hungary will have to cut spending by about one to 1.5% of its gross domestic product (GDP) to fulfill the goals set by the International Monetary Fund (IMF) and the European Union (EU) this year but the Countries must also revive growth, said Monday the Minister of Economy.
Through several interventions aimed at calming investor fears, Gyorgy Matolcsy said that Hungary will stick to its objective of a fiscal deficit of 3.8% of GDP.
Speaking on CNBC, the Hungarian Minister of Economy said that there had been a number of failures in communication last week and added: "It is absolutely clear that Hungary is not Greece" .
On Saturday, the Hungarian government had already said to stick to its target of 3.8% deficit to GDP ratio in 2010 and was then considered "exaggerated" the official statements that had contributed to a downturn on the eve of Scholarships and a weaker euro.
"We will stick at 3.8% budget deficit this year, it was agreed with the IMF and the EU and accepted by the government and there is no doubt about it, we will stick to this figure "said Gyorgy Matolcsy.
"On the one hand, it is clear that austerity plan was not necessary. On the other hand, no recovery plan for the budget is considered.We will reduce budgetary spending and we will increase revenues and is the action plan of the new government. "
He also reiterated the government's plans for a tax cut, which does raise some questions among analysts about the ability of Budapest to meet its target budget deficit of 3.8% of GDP this year.
INVESTOR Perplexed
"We can not help being perplexed when the Hungarian authorities speak of a much larger budget deficit than expected and at the same time they exclude austerity measures and instead promise of tax cuts," said Lars Christensen, an analyst at Danske Bank.
Investors also continue to be skeptical since the early exchanges, the Budapest Stock Exchange fell more than 5%, while the euro continued to trade at least $ 1.20 and the forint vis-retreated à-vis the euro.
Bank stocks such as OTP Bank and FHB are particularly challenged, the first yielding 4.55%, after having lost 10%, while the second lost 3.41% at 7:30 GMT.
According to the Hungarian press, the Hungarian government could tax the banks to achieve its economic goals.
Gyorgy Matolcsy said on CNBC that by the end of May, 87% of the annual target budget deficit has already reached.
Most economists believe that Hungary is in a stronger position than that of Greece, its deficits and debt levels are not as high as those in Athens.
In fact, the Hungarian government debt has reached about 80% of GDP in 2009, against 133% for Greece expected this year. Budapest also has a surplus on current account last year and reduced its budget deficit to 4% after significant reductions in its spending.
However, the government nonetheless began Saturday a three-day meeting. The announcement of a program of measures is expected by the end of the day.
Gyorgy Matolcsy noted in particular a proposal for the removal of 20% of the 58 different categories of taxes.He hoped that a radical program of tax cuts three years could be launched this year.
