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Ensuring Debt Sustainability Amid Strong Economic Uncertainty in Hungary

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  • Pierre Beynet
  • Rafal Kierzenkowski
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    Abstract

    Despite a deep recession in 2009 and weak growth in subsequent years, Hungary’s fiscal position compares favourably with many other OECD countries. Nonetheless, the underlying fiscal balance started deteriorating in 2010 and 2011. Recognising this, Hungary’s government launched an ambitious set of fiscal consolidation measures in spring 2011, the Széll Kálmán plan, which is rightly focused on curbing public expenditure. This plan, together with subsequent significant revenue-increasing measures, should help restore fiscal adjustment in 2012 and 2013. However, ensuring the sustainability of Hungarian public debt remains challenging in the context of the persistence of the sovereign debt crisis in many European economies since shifts in market sentiment could lead to unsustainable debt servicing costs. In this context, increasing the credibility of fiscal consolidation requires using several policy levers. First, the cost/risk assessment of the debt management strategy should be reassessed by taking into account lessons from the current crisis: the share of government borrowing in foreign currency will likely need to be drastically reduced. Second, additional consolidation efforts should focus more strongly on the spending side and avoid raising distortive taxes. Third, the fiscal framework should be improved by making fiscal rules less pro-cyclical and by raising the profile and political acceptance of the fiscal council through better analytical support and an enlarged mandate, while removing its power to veto the budget. This Working Paper relates to the 2012 OECD Economic Survey of Hungary (www.oecd.org/eco/surveys/hungary). Assurer la viabilité de la dette publique dans un contexte de forte incertitude économique en Hongrie En dépit d’une grave récession en 2009 et d’une faible croissance au cours des années suivantes, la situation budgétaire hongroise est meilleure que celle de beaucoup de pays de l’OCDE. Néanmoins, le solde sous-jacent a commencé de se dégrader en 2010 et 2011. Conscient du problème, le gouvernement a lancé au printemps 2011 un dispositif ambitieux de redressement budgétaire, le plan « Széll Kálmán », qui est centré à bon escient sur la réduction des dépenses publiques. La conjonction de ce plan et de mesures subséquentes d’augmentation substantielle des recettes devrait permettre de revenir vers l’ajustement budgétaire en 2012 et 2013. Cependant, il reste difficile d’assurer la viabilité de la dette publique hongroise face à la persistance de la crise de la dette souveraine dans de nombreuses économies européennes, car les changements de perception des marchés pourraient porter le coût du service de la dette à un niveau insoutenable. Dans ces conditions, il est nécessaire d’employer plusieurs leviers pour renforcer la crédibilité du redressement budgétaire. Il convient d’abord de réévaluer la stratégie de gestion de la dette en tirant les leçons de la crise actuelle : la part des emprunts de l’État libellée en devises étrangères devra probablement être fortement réduite. Ensuite, il faut faire porter davantage l’effort d’assainissement sur les dépenses et s’abstenir d’augmenter les impôts qui introduisent des distorsions. Enfin, le cadre budgétaire doit être amélioré en rendant les règles budgétaires moins procycliques, mais aussi en donnant plus de poids et de soutien politique au conseil budgétaire grâce à un renforcement de ses moyens d’analyse et à l’élargissement de sa mission tout en supprimant son pouvoir de veto sur le budget. Ce Document de travail se rapporte à l’Étude économique de l’OCDE de la Hongrie, 2012 (www.oecd.org/eco/etudes/hongrie).

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    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 958.

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    Date of creation: 22 May 2012
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    Handle: RePEc:oec:ecoaaa:958-en

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    Keywords: taxation; Hungary; public spending; fiscal institutions and rules; public debt management; fiscal consolidation; assainissement budgétaire; Hongrie; règles et institutions budgétaires; fiscalité; dépenses publiques; gestion de la dette publique;

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