First quarter shock has Hungary preparing economic stimulus package

By bne IntelliNews May 26, 2016

Alarmed by poor GDP growth in the first quarter of 2016, the Hungarian government is preparing an economic stimulus package, local press reported on May 26.

It seems that Hungary’s 0.9% GDP growth reported in Q1 - representing the slowest rate of expansion since Q1 2013 and second lowest in the EU - did not only surprise the market, but also the Hungarian government. Budapest has targeted 2.4% growth for this year.

That shock pushed Prime Minister Viktor Orban to call “crisis meeting” on May 18 not long after the publication of the latest GDP data reports Figyelo. “Representatives of the cabinet were coming and going ... to explain the data that showed contraction on a quarterly basis and moderate growth on an annual basis,” the outlet wrote.

Agnes Hortung, state secretary in charge of finances told the newspaper that there have been several consultations in the government about an economic stimulus package. However, she did not provide much information about the planned measures.

Janos Lazar, head of the Prime Minister’s Office, suggests that the government plans to support economic growth by speeding up preparations for state projects and boosting the investment market. However, the latter appears to be a reference to a plan to revive activity on the sleepy Budapest Stock Exchange that has beenin place for some months.

"The next step would be helping small and medium-sized enterprises go public,” Hortung confirmed. The Magyar Nemzeti Bank, which bought full control of the BSE in November and has pledged to revive the bourse following years of decline. The central bank put special emphasis on attracting SMEs to raise capital on the exchange in a strategy document published in March.

Lazar also announced that state-owned development bank MFB will launch a new program to give interest-free loans of HUF1-600mn (€3200-1.9mn) to SMEs.

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