Government plans budget revenue rise, spending cuts

Hungary's budget revenue is expected to increase by HUF 1,000 bn (EUR 3.64 bn) annually in the 2013-2015 period as a result of the government's measures to boost jobs and cut state spending, Economy Minister György Matolcsy said on Friday.

Spending cuts are estimated to be worth HUF 600-800 billion in the planned period, as a result of servicing debts, eliminating costs related to private-public-partnership (PPP) projects and other operating costs in the state administration, he said.

Matolcsy, who addressed a meeting of employer and employee representatives (OET), said the government had calculated the creation of 400,000 new jobs by 2015.

The government proposes raising the minimum wage by at least 4.5 percent to HUF 76,800 (EIR 280) per month from January 1, 2011. Pay for people with vocational degrees would rise by at least 3.4 percent to HUF 92,500, Matolcsy said at the meeting.

The key numbers of the 2011 budget are 3 percent economic growth, 3.5 percent inflation on a downward slope and diminishing state debt, Matolcsy said.

The 2011 draft budget approved by the government on October 27 targets a cash-flow deficit of 2.8 percent of GDP as defined in Hungary's agreement with the IMF and the European Union.

Matolcsy said the windfall taxes on Hungary's energy, retail, telecom and banking sectors levied to offset the costs of planned tax cuts were temporary and would help induce a general improvement in the economy in the longer term.

Matolcsy said the budget imbalance is mainly caused by a massive gap in pension and healthcare funds. These could not be plugged by rearranging budget chapters, only by boosting investment and employment, which would automatically optimise the balance of the two funds.

The centre-right Fidesz government has decided to channel assets from private pension funds into the state pension system to meet its deficit target next year and offset lost revenue as a result of the costly tax cuts.

Matolcsy said the government planned to phase out private pension funds in the medium-term.

Analysts have said hospitals, the public sector and unions were likely to be the major losers of the centre-right Fidesz government's 2011 budget.

The government will submit the chapters of the 2011 budget bill to parliament on Monday and the package of related bills next Friday and will vote on the main chapters on December 7.