Hungary: Public finance challenge
Growth decelerated markedly during 2007, reflecting fiscal consolidation. It is likely to recover over the projection period, supported by buoyant exports and gradually reaccelerating investment and consumption. Inflation is projected to decelerate towards the 3% target, as wage growth remains moderate. The external deficit should continue to improve.
The main challenge is to restore the sustainability of public finances. If public-expenditure reform goes according to plans it will bring dividends to the economy via increased confidence, lower interest rates and reduced tax and social security wedges. This progress, along with reforms to improve labour supply, will be conducive to more stable growth in the longer term.
No. 264/265, December 2007-January 2008
• OECD Economic Outlook No. 82, December 2007
• Visit www.oecd.org/hungary
• All OECD Observer articles on Hungary