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Hungary’s government has today approved the Convergence Programme to be sent to Brussels on Friday, Economy Minister György Matolcsy has told a press conference on Wednesday. Before the nod on the Convergence Programme the cabinet finalized the package of structural reform measures announced in early March under the name Széll Kálmán Plan, he added. This package was the basis for the Convergence Programme and for the National Reform Programme Hungary will also submit to the European Union.

The minister has disclosed a few new details of the structural reform plans and some that had been brought to light before.

Macroeconomic framework

Matolcsy said the macroeconomic path laid down in the Convergence Programme is the same as in the Széll Kálmán Plan. In an attempt to dispel possible criticism that the growth estimates are overly optimistic, Matolcsy said the programme outlined two scenarios:

1)The conservative growth estimate takes into consideration the growth risks existing in the euro zone. In this scenario the cabinet projects 3.5% GDP growth for 2012 and expects it to remain between 3% and 4% (the same as in the reform package). Further fiscal adjustment will be necessary only if economic output grows by no more than around 3%, Matolcsy stressed, responding to a question by a journalist.

2) In the optimistic growth scenario the government projects a 4-6% GDP growth in the 2013-14 period. The estimate for 2012 is 3.5%, and above 5% in 2014.

The cabinet concurs with the central bank’s (NBH) inflation projection, namely that the consumer price index will drop to 3% yr/yr by the end of 2012. Matolcsy said they consider the bank’s projection “correct and realistic”.

The budget deficit prognoses also match those in the Széll Kálmán Plan. The forecasts are: around 2% of GDP surplus in 2011, including private pension fund assets and a cc. 3% gap without these assets; 2.5% deficit in 2012, 2.2% in 2013 and 1.9% of GDP in 2014.

Matolcsy underlined that the structural reform measures will help stabilise and reduce the budget deficit in a sustainable way, adding that “Hungary will be able to remain on a budget deficit reduction path that is required to get out of the excessive deficit procedure.”

Széll Kálmán Plan in its final form

At today’s government meeting the ministers finalised the deficit reducing target numbers on different areas. Matolcsy has not disclosed the full impact of the plan, but mentioned specific figures in certain areas and other important data. These are the following:

read whole article PORTFOLIO.HU | Hungary unveils new details of reform package (2).