Hungary sees public deficit ratio at 5.7 pct in 2007

Hungary sees public deficit ratio at 5.7 pct in 2007

Hungary managed a fiscal turnaround last year, slashing its public deficit to an estimated 5.7 percent of gross domestic product (GDP) in 2007 from 9.2 percent in 2006, Finance Minister Janos Veres said Monday.

The government has repeatedly lowered its forecast for the deficit ratio this year from an original prognosis of 6.8 percent, thanks to better-than-expected tax revenues resulting from massive belt-tightening.

"The public deficit last year was around 5.7 percent of GDP, instead of the forecast 6.8 percent," Veres told a press conference here.

Veres said the final deficit figure ratio would be in the range of 5.5-5.8 percent, depending on the budgets of municipalities, which will be tallied in the coming months.

The overall deficit ratio stood at 9.2 percent in 2006 -- by far the highest in the 27-member European Union -- but would have topped 11 percent without the austerity measures that included tax hikes and cuts in household energy price subsidies.

The Socialist-led government is now scrambling to deal with the side-effects of the biggest austerity package since Hungary's transition to a market economy in 1989, which has brought growth almost to a standstill.

The economy grew by a mere 1.0 percent in the third quarter of 2007, down from 4.0 percent in the same period of 2006, as household consumption and real wages slumped.

The deep deficit cuts have also resulted in record-low poll ratings for Prime Minister Ferenc Gyurcsany's government and an opposition call for early elections.

But the government has pledged to stay the course on fiscal discipline and finish its four-year term ending in 2010.

It forecasts a deficit ratio of 4.0 percent for 2008 and 3.2 percent in 2009, within striking range of the 3.0-percent ceiling laid down in the European Stability and Growth pact for EU nations wanting to adopt the euro, the eubusiness reported.

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