September 7, 2019 / 11:32 AM / 2 months ago

Hungary must maintain fiscal discipline in face of slowdown - minister

BUDAPEST (Reuters) - Risks to global economic growth are unlikely to trigger an outright recession, Hungary’s Finance Minister Mihaly Varga said on Saturday, adding that the best way to tackle a slowdown was to maintain fiscal discipline and market stability.

FILE PHOTO: Hungarian Finance Minister Mihaly Varga speaks during an interview in Budapest, Hungary November 21, 2018. REUTERS/Gergely Szakacs

“Whenever there is a slowdown and we cannot speak of an acceleration of growth cycles, positions of balance always come to the fore,” Varga told a meeting of Hungarian economists.

“We must avoid fiscal profligacy and maintain fiscal discipline and rigour,” Varga said.

On Thursday, central bank Governor Gyorgy Matolcsy said risks to global growth, such as Brexit, the U.S.-China trade war and a slowdown in the euro zone, mean Hungary should consider a new programme to bolster economic growth.

Varga said, however, that the government’s commitment to cut the budget deficit to 1% of gross domestic product and set aside fiscal buffers worth the same amount next year was the best approach to curb risks to growth in the current environment.

In the longer run, Prime Minister Viktor Orban’s government, which has sharply lowered Hungary’s budget shortfall and public debt over the past decade, is aiming for a balanced budget.

“We cannot say one week that we should do a budget with zero deficit and cut the shortfall as quickly as possible only to say the following week that we should start overspending and launch new stimulus,” Varga said.

He said the budget must remain on a conservative path and Hungary should strive to maintain its high investment rate to keep convergence towards richer Western European peers on track.

Varga said of about 100 new foreign investment projects in the pipeline, three have been scrapped for reasons he did not specify. Another three projects were on hold due to the global economic slowdown, he said.

“But the overwhelming majority of these projects will be implemented,” Varga said, adding that Hungary needed a stable and predictable exchange rate EURHUF=D3.

Reporting by Gergely Szakacs; Editing by Alexander Smith

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