Ecofin recommendations no longer mention directly the need for a fiscal adjustment worth 0.9% of GDP this year, although a warning of a likely deviation from Hungary’s -1.7%-of- GDP medium-term objective as well as of non-compliance with the debt rule from 2014 remained.

The recommendations no longer directly criticise the size and efficiency of Hungary’s large-scale public work programme, although still urge a review of its effectiveness to lead people back to employment. Ecofin also dropped the Commission’s former remarks on the adverse effect on capacity and investments of the governmentinitiated price cuts in the utilities sector. It still recommended, however, that Hungary review their impact on incentives to invest and on competition in the affected markets, urged further steps to ensure the autonomy of the national regulator and to increase energy efficiency.

Ecofin recommended simplifying the taxation of businesses, including phasing out sector-specific taxes, but omitted a former comment that they were an obstacle to growth. Most of the remaining recommendations remained as originally proposed by the Commission, including calls that Hungary reinforce budgetary measures for 2014, strengthen budgetary strategy and keep the structural fiscal deficit ratio and state debt on a sustained downward path.

It also recommended that Hungary improve the transparency of public finances and “help restore normal lending flows to the economy,” among other advice.

Source www.hungarymatters.hu

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