EC recommends fiscal adjustments of 0.3 pc, 0.6 pc of GDP in 2016, 2017

Brussels, May 18 (MTI) – The European Commission said Hungary should make fiscal adjustments equivalent to 0.3 percent of GDP in 2016 and 0.6 percent in 2017 to meet its medium-term deficit goal in its country-specific recommendations issued on Wednesday.

The EC said it calculated that Hungary would overshoot its mid-term 1.5 percent structural deficit target, requiring “further measures” in both 2016 and 2017.

Hungary’s government aims to gradually improve the country’s structural balance and achieve the medium-term target by 2019.

The EC noted a “high risk of a significant deviation” from the required adjustment in 2016, as well as in both 2016 and 2017, if policies remain unchanged.

The EC recommended that Hungary further cut sector-specific taxes, reduce the tax wedge for low-income earners, strengthen transparency and competition in public procurement procedures, further improve an anti-corruption framework and address “restrictive regulations” in the service and retail sectors.

It also urged officials to facilitate a transition from a fostered work programme to the primary labour market, improve the adequacy and coverage of social assistance and unemployment benefits, and take measures to improve educational outcomes and increase the participation of disadvantaged groups, particularly Roma, in mainstream education.

The EC said the adjustment required to meet the medium-term budgetary objective had been lowered in 2015 to reflect the fiscal impact of a wave of refugees and an assessment of any such costs in 2016 would be made in the spring of 2017.