Hungary upbeat on growth, EU deficit procedure exit

Hungary's recession-hit economy is set to grow again through 2016, while a drop in the public deficit should allow it to exit the EU's excessive deficit procedure, Economy Minister Mihaly Varga said Tuesday.

"In 2013, the economy will begin to grow again," Varga told a press conference called to present the Convergence Programme for 2013-2016 that Budapest sent to the European Commission on Monday.

After contracting by 1.7 percent in 2012, the economy was expected to grow by 0.7 percent this year, thanks to stronger agricultural output, more foreign demand and a 250-billion-forint (850-million-euro, $1.1-billion) corporate loan programme by the central bank, he said.

Inflation this year was estimated at 3.1 percent.

In 2014, growth is forecast to reach 1.9 percent, followed by 2.3 percent in 2015 and 2.5 percent in 2016.

Varga said that no further austerity measures would be required to keep the public deficit below the EU limit of 3.0 percent of gross domestic product (GDP).

Hungary has managed to remain below that level for the past two years, and in 2013 and 2014, it is expected to be 2.7 percent, before dropping to 2.2 percent in 2015 and 1.3 percent in 2016.

Under terms of the EU's Maastricht Treaty, member states are supposed to run public deficits of no more than 3.0 percent of GDP, and are bound to work towards a balance and even a surplus in times of economic growth.

"Hungary has every reason to suppose that Brussels will scrap the EU's excessive deficit procedure which has applied every year since 2004," when Hungary joined the union, Varga concluded.

Opposition parties called the plan too optimistic however and cast doubts on Varga's announcement that no further measures would be needed to balance the budget.

"We'll believe it when we see it," the largest opposition Socialist party said in a statement.

On Tuesday, the International Monetary Fund revised downward its 2013 growth forecast for Hungary to zero from 0.8 percent in its previous outlook.

"Hungary faces a difficult outlook due to high public and external debt, along with unconventional policies that have eroded confidence and investment," the IMF said.