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IMF Commends Hungary on Strong Growth, Urges Further Fiscal Steps

MTI-Hungary Today 2019.12.06.

International Monetary Fund (IMF) directors acknowledged Hungary’s strong economic growth and reduced external vulnerability, but urged continued fiscal consolidation in an assessment issued Thursday, after a regular Article IV consultation.

“[IMF Executive Directors] commended Hungary’s continued strong economic performance, which has led to faster income convergence towards the European Union average and reduction of vulnerabilities,” the IMF said in a press release.

“However, given the increased external uncertainty and Hungary’s still high public debt and gross financing needs, Directors encouraged continued fiscal consolidation and supply-side reforms, to further build resilience and sustain the growth momentum,” the fund added.

The directors recommended decision-makers reduce exemptions, broaden the tax base, phase out sectoral taxes, moderately reduce spending on goods and services, contain the public wage bill and rationalise generalised subsidies.

They also said “close monitoring” of the housing market is warranted, adding that existing demand-stimulating incentives should be scaled down.

A table of selected economic indicators for the country attached to the release shows Hungary’s GDP growth reaching 4.9 percent this year.

In the latest World Economic Outlook, the IMF had put Hungary’s GDP growth at 4.6 percent for 2019.

Data released by the Central Statistical Office (KSH) late in November show Hungary’s GDP rose an unadjusted 5.1 percent year on year in Q1-Q3. Days after the release, Finance Minister Mihaly Varga said Hungary’s GDP growth was expected to reach 4.8 percent for the full year.

The table attached to the latest IMF release projects Hungary’s economy will expand by 3.5 percent next year, above the 3.3 percent forecast in the October World Economic Outlook.

The table shows Hungary’s current-account deficit is expected to widen to 0.9 percent of GDP this year, before narrowing to 0.7 percent of GDP in 2020.