“The Hungarian economy is on a stable footing. While in 2011 state debt exceeded 80 percent of GDP, according to the latest data it is now under the psychological margin of 70 percent, hitting 68.2 percent at the end of June, and the GDP growth for the second quarter of 2019 reached 5.2 percent, placing Hungary second in the EU rankings” , the Ministry of Finance’s Parliamentary State Secretary András Tállai said at a press conference on Tuesday in Budapest.

He added that the projected 4.1 percent increase in Hungarian GDP for 2019 could be higher, perhaps 4.6 percent. Mr. Tállai  said that his primary objective with relation to the management of state debt is the reduction of the debt  ratio, by increasing the stock of consumer government securities and decreasing the ratio of foreign currency debt.

The Ministry of Finance’s Parliamentary State Secretary drew attention to the fact that economic growth of such degree, combined with a decreasing state debt and budget deficit, meaning a disciplined budget is a rare conjunction, the general practice is for these processes to be strengthened or weakened at the expense of each other.

Mr. Tállai recalled that the Hungarian Central Statistical Office (KSH) has revised the previous year’s growth data; the GDP increased by 5.1 percent rather than 4,9 percent in 2018. This year, the Hungarian economy grew at an even higher rate, by 5.2 percent. This rate of growth puts Hungary in second place in the EU rankings, surpassing the 1.4 percent European Union average almost four times over.

“The growth is primarily being driven by government measures and internal engines. The government measures, and in particular the six-year wage agreement, the government’s competitiveness program and its facilitation of family home creation, as well as the economic climate that promotes investment, have jointly contributed 1.6 percentage points to this growth”, the State Secretary added.

Mr. Tállai highlighted that last year’s growth is also confirmed by data from the National Tax and Customs Administration (NAV), and based on 2018 corporate tax returns, net turnover increased by 5.4 percent compared to 2017.

The State Secretary emphasized that the Hungarian government’s main objective with relation to managing sovereign debt is the reduction of the debt ratio, increase of the stock of consumer government securities and decrease the ratio of foreign currency debt.  Within sovereign debt, the ratio of foreign currency debt has fallen to 21 percent from 52 percent at the end of 2011, and the share of foreign debt ownership fell from 65 percent to 35 percent, thus contributing to reducing the country’s foreign currency exposure. “This year, this process has also been recognized by international credit rating agencies”, Mr. Tállai said.

He also pointed out that the measures included in the Economy Protection Action Plan are working, and the Hungarian Government Security Plus  bond is contributing significantly to reducing the ratio of foreign currency in  Hungarian sovereign debt.

By the end of the year, the situation could become even more favorable, as according to the latest data the population has subscribed to the Hungarian Government Security Plus bond at a total value of 2215 billion forints (EUR 6.63 billion).

(Ministry of Finance/MTI)