BUDAPEST -(Dow Jones)- Hungary should continue to rely on exports and not domestic consumption to boost its gross domestic product so as to pursue sustainable growth, Finance Minister Peter Oszko said Tuesday.
"It's possible to generate pro forma growth from debt, domestic --public --consumption, but that wouldn't be real and sustainable," Oszko said in a speech at a conference about the lessons of the global economic crisis.
Growth should be generated while the economy is in equilibrium, Oszko added. The size of sovereign debt and the indebtedness of households should receive a bigger weight than earlier when judging a country's economic health, he added.
Hungary was the first country in the European Union that sought help last year from the International Monetary Fund, when it was hit hard by the crisis because of its large budget deficit and external debt.
It has also seen its exports falling sharply as demand for Hungarian goods has fallen drastically, especially for automotive and consumer electronics, from Western Europe, its main export market, and especially from Germany.
The IMF and the EU, Hungary's biggest creditors, agreed Monday that Hungary won't draw on the next installment of its EUR20-billion credit line but keep it as a reserve should need for it arose.
The IMF also said Monday that it wouldn't tolerate the next government, due to come into power after general elections in spring next year, amassing a budget deficit of 7% or even more of GDP. The Fidesz party, which is widely tipped to make up the next government, has already said that it expects the budget shortfall to widen to 7% or more in 2010.
"The leaders of Fidesz must have realized that they'll have to stick to the main parameters of the IMF-EU agreement" to ensure the financing of the budget, KBC economist Zsolt Papp said earlier Tuesday.
"The interesting question remains how Fidesz will attempt to consolidate the fiscal targets with its general campaign promise of easing the tax burden," Papp added.
Fidesz doesn't support a fiscal policy that would boost the deficit but the current 2010 budget plan fails to include the proper amount of losses expected from the state railways, public transport, state hospitals, foreign exchange losses and a potential shortfall of tax revenues, state news agency quoted Fidesz Vice President Mihaly Varga as saying earlier Tuesday.
Ministry web site: www.pm.gov.hu
-By Margit Feher, Dow Jones Newswires; +36-20-925-2364; margit.feher@dowjones.com
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(END) Dow Jones Newswires
November 17, 2009 12:22 ET (17:22 GMT)
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