Fiscal sustainability a priority
Output growth of close to 4.25% is expected in 2005, rising to 4.5% in 2006 before edging down a little in 2007. While some reduction in the contribution from the external sector is likely, domestic demand is expected to pick up. Inflation is set to fall sharply in the near term, reflecting reductions in indirect taxes, but will rise again in 2007, though it will remain on track to meet medium-term targets.
Ensuring fiscal sustainability must be a priority. For 2006 the government aims for a substantial cut in the headline budget deficit but one-off factors, notably plans to take expenditure on motorway construction off budget, suggest that the underlying deficit will increase by about 1 percentage point of GDP. A fiscal strategy that backs realistic targets with stronger spending discipline is needed to recover credibility and avoid an increase in the risk premium.
| Population (000s), 2004 | 10 107 |
| Area (000 sq km) | 93 |
| Currency | Forint |
| GDP (Billion USD), 2004 | 100.3 |
| Life expectancy at birth (Women, Men), 2003 | 76.5, 68.3 |
| Total labour force (000s), 2004 | 4 153 |
| Government type | Parliamentary Democracy |
| Indicators | % change unless otherwise indicated |
|---|
| 2005 | 2006 | 2007 |
|---|
| GDP growth | 4.2 | 4.5 | 4.3 |
| Consumer price index | 3.7 | 2.0 | 2.7 |
| Short-term interest rate (%) | 6.8 | 5.8 | 5.5 |
| Unemployment rate (%) | 7.1 | 7.0 | 6.7 |
| General government financial balance (% GDP) | -6.1 | -5.9 | -5.9 |
| Current account balance (% GDP) | -8.4 | -8.7 | -8.5 |
Source: OECD©
OECD Observer, No. 252, November 2005
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