The key objective of Hungary’s economic policy in the coming term is to make economic growth more deep-rooted and stable, to facilitate further employment growth and improve the competitiveness of the country, Mihály Varga said at two hearings of parliamentary committees preceding his nomination as Economy Minister for the next four years.

The Minister stressed that nothing endangers the 2.9 percent budget deficit target for this year, adding that Hungary’s budget is typically “frontloaded”: expenditures are very high in the initial months of the year, while large amount of revenues usually flow in at the end of it.

Mihály Varga stated that the Government does not intend to change the flat rate personal income tax and only some “fine-tuning” can be expected within the taxation system. He added that for the remainder of the year the Government does not plan the issuance of forex bonds, but they will seek to finance the budget from the domestic forint market.

In the opinion of the Minister, this year is a lucky one as the start of the new parliamentary term and the new EU fiscal period coincide, and thus domestic and EU development funds can be better harmonized. The allocation of funding must be rearranged in a way, he added, which best facilitates higher added value production. In the next seven years, the Government intends to spend 60 percent of EU resources on economic development projects. The corresponding figure, he added, was 16 percent in the previous EU fiscal period.

He called attention to the fact that it is less and less possible to generate growth through attracting capital with cheap labour. Therefore, he continued, economic policy must focus on sectors with high growth potential: those that are capable of high added value production. In addition to stressing the significance of the vehicle manufacturing sector and the related electronics industry, the Minister pointed out that it is also important to place larger emphasis on SMEs, most of which are owned by Hungarians. These can be the engines of growth in fields such as the food industry and the tourism sector. Among the other priority sectors the Minister mentioned water and sewage management, manufacturing of medical equipment and appliances, healthcare, pharmaceuticals and logistics.

Some HUF 1200bn will be disbursed over the next seven years on research, development and innovation. The ultimate goal is have thirty research and innovation centres all over the country which will operate in close cooperation with universities and large enterprises, he said.

As far as business regulation is concerned, the Government aims to further cut red tape and thus increase the number of new businesses. To this end, entrepreneurial spirit must also be bolstered and in this effort the Government will be assisted by the Hungarian Chamber of Trade and Industry. He stated that in the coming term the field of vocational training will become the responsibility of the Ministry for National Economy and the Ministry will join forces with the Chamber in determining the guidelines of vocational training.

He also said that the issue of the training of public work employees continues to be a priority, as this can pave the way for them to the labour market. Mihály Varga stressed that the Government aims to continue the Job Protection Action Plan which has hitherto helped some 80 thousand people to keep their jobs.

Responding to questions the Minister stated that the second Orbán Government has made successful efforts to address the plight of forex borrowers by introducing the exchange rate barrier mechanism and setting up the National Asset Management Agency, and as a result the number of forex borrowers decreased from 750 thousand in 2010 to below 500 thousand by now. He reiterated that foreign currency loans must be phased out of the mortgage market.

Finally, he emphasised that the Government has no forint exchange rate target; it shall be determined by the markets.