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IMF: Hungary's Economy Overcomes Crisis But Still Vulnerable

Tamás Székely 2015.02.02.

Hungary’s central bank should consider a further cautious monetary easing in the face of persistent disinflationary pressures, the International Monetary Fund (IMF) said in its annual preliminary monitoring report.

There is a need for gradual fiscal consolidation based on more efficient, equitable, and growth oriented public expenditure and tax policies. Progress on the fiscal front needs to be complemented with structural reforms to unleash Hungary’s growth potential and improve its attractiveness as a place for domestic and foreign entrepreneurs to create more jobs and innovate. (Hungary: Concluding Statement of the 2015 Article IV Mission January, 30, 2015 – imf.org)

Hungary’s economy is coming back from the crisis but the road to strong, sustained activity and higher private sector employment is still a long one, the IMF said, adding that Hungary’s macroeconomic policies have contributed to a welcome reduction in vulnerabilities, strong growth and a reduction in unemployment. “But the country remains susceptible to shocks and its medium-term growth prospects are subdued,” the IMF report said.

This offers policymakers an opportunity “to re-calibrate policies to address the remaining vulnerabilities and structural weaknesses.” According to IMF, all this requires gradual fiscal consolidation based on more efficient, equitable and growth-oriented public expenditure and tax policies. “Sustaining strong growth will also require preserving price stability and reviving financial intermediation, including by improving the operating environment for the banking sector,” it said.

via hungarymatters.hu and imf.org photo: former IMF office in Budapest (via mon.hu)