Varga: 2016 budget about tax cuts and developments

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.