Hungary is presently facing high levels of debt and its investors are losing faith in the country s economy. The Hungary budget 2012 will look to address these areas properly.
Highlights of Hungary Budget 2012:
The 2012 Hungary budget will aim to limit the aggregate deficit of the public sector to 2.5 percent of the GDP.
As per the draft 2012 budget, Hungary economy is estimated to grow by 1.5 percent but experts feel that these predictions might not be matched.
According to the central bank of Hungary, the national economy might not even grow by 0.6 percent.
The OECD has stated that the Hungarian economy will reduce by 0.6% in 2012.
According to analysts the growth rate will be 0.5 percent.
The 2012 budget has earmarked 300 billion forints for safeguarding the economy against the risks Hungary faces due to the present economic condition of the Eurozone.
The government has stated that it might introduce stricter economic measures if the growth is any less than 0.5 percent.
Hungary government has taken many steps to improve the budget balance through unprecedented policy measures 14 billion dollars have been earmarked for nationalizing the pension fund properties.
In 2012 major crisis taxes will be levied on sectors like banks. It is assumed that this will generate increased revenues.
The Value Added Taxes will go up to a maximum of 27 percent in 2012, which implies an increase of 2 percentage points.
The central government will reduce its employee capacity by 5,500.
The targeted nominal deficit for 2012 is 2.49 billion dollars or 576.5 billion forints. As per the government, this will take fiscal deficit to 2.5% of the GDP.
Hungary Budget 2012 Expert Analysis:
According to experts the success of the 2012 budget will depend on Hungary s ability to negotiate with the International Monetary Fund regarding a financial deal. Moody s a leading global credit rating agency, has reduced Hungary s ranking to Ba1 and has expressed concerns as to whether it will be able to satisfy its fiscal goals.
Recently, the central bank has increased its interest rates to 6.5 percent, which is the highest in the last two years. This will also increase market confidence after the forint has been reduced to its lowest rate ever in recent trades. Hungary s debt yields have gone above 9 percent.
Andras Simor, the governor of the central bank, has stated that more restrictive measures will have to be introduced if Hungary s economy is to grow in the days to come.
The central government has suffered loss of support after the latest elections and this has led it to request financial assistance from the IMF, which will be a total u-turn on its previous fiscal policies.
Hungary had previously stated that it will not accept any conditional financial assistance from the IMF but has now said that it will negotiate. The fiscal procedures to be employed by Hungary to secure the deal will be observed keenly by investors.