Dec 22, 2016

Hungary's state debt will fall this year

Minister Varga said that wage increases would boost consumption and lending in 2017-2018

Hungary’s state debt will fall this year despite a slightly weaker-than-expected currency, Mihály Varga, minister for National Economy, said in an interview with Figyelo.

According to Reuters, about a quarter of Hungary’s debt, which equated to 74.7 percent of gross domestic product (GDP) in 2015, is denominated in foreign currency and so impacted by the exchange rate.

The Hungarian government sees economic growth accelerating to over 4 percent in the next two years, it said earlier this week.

The government has signed an agreement with private sector employers on big hikes in the minimum wage for the next two years in return for cuts in payroll taxes and a reduction in corporate tax to a flat 9 percent.

Minister Varga told Figyelo the wage increases would boost consumption and lending in 2017-2018.

He also said the government could restart the manufacturing of weapons as part of its plan to boost the country’s defense capabilities and defense industry.

Varga also said Hungary was not planning a significant foreign currency bond issue but “the possibility cannot be excluded.” The government is expected to unveil its 2017 debt financing plan before the end of the year.

The minister also said several banks, both Hungarian and foreign, had signalled an interest in state-owned Budapest Bank but were unwilling to pay the price of around 700 million USD that the government paid for the bank. He said Budapest Bank could still be sold in the first half of 2017.