The economy minister on Thursday announced new measures aiming to compensate for a lower growth and weaker exchange-rate target next year.

The government now bases its 2012 budget on economic growth of 0.5 percent and a rate of 299 forints to the euro. The new assumptions mean that a gap of 320 billion forint gap must be plugged.

The original budget bill calculated with a HUF/EUR rate of 268 and GDP growth of 1.5 percent. New measures include tapping 200 billion forints of reserves while generating an extra 120 billion by diverting private-pension contributions next year, raising 20 billion forints by hiking excise duty on tobacco products, while another 52 billion come from new ministry reserves. Matolcsy said the future of the entire pension system would have to be reconsidered.

György Matolcsy (photo:Ernő Horváth)

He said the government had approved measures aiming to keep the budget deficit at 2.5 percent of gross domestic product (GDP) next year, placing Hungary among seven EU member states which have managed to push their deficit to below 3 percent of GDP. At the same time the public debt will be reduced, he added. Matolcsy said these achievements had been compromised by the crisis in the euro zone and the slowing global economy, as well as the banking crisis.

Commenting on the European Central Bank's (ECB) statement that the Hungarian government had not consulted on the planned merger of the central bank and financial watchdog PSZAF, Matolcsy said the government had initiated consultations with the ECB upon making the proposal. Andras Giro-Szasz, the government's spokesman, said the government wants to preserve central bank's independence, and insisted that the government had consulted every player involved, including the ECB.

Giro-Szasz added that the government was committed to its euro convergence plan and deficit target, and believed that changes in the budget, the economic Szell Kalman plan and the convergence plan could be managed.