BUDAPEST, Dec 17 (Reuters) - Hungary’s government is planning to launch new incentives to revive bank lending next year, including an expanded system of state guarantees, Economy Minister Mihaly Varga was quoted as saying on Thursday.
The National Bank of Hungary has extended its Funding for Growth Scheme into 2016 and launched a set of measures of its own to get commercial banks to lend more after years of steep losses and deleveraging.
“Using domestic and European Union resources we will put guarantees behind a much wider array of loans to ensure that bank lending is more active in riskier sectors such as trade or construction,” Varga was quoted as saying in an interview in the weekly Figyelo.
He added that the government would overhaul the tax law next year but did not go into detail.
Varga said the 2015 budget deficit could come in at 2.2 percent of economic output, below the government’s target of 2.4 percent. The central bank has estimated the shortfall at 2 percent of gross domestic product.
He added that domestic consumption should carry an increasing weight in Hungary’s economic growth, but wages would inevitably need to rise to achieve that objective.
“We cannot attract capital with low wages forever, this cannot remain like this,” Varga was quoted as saying. “We must strive to improve our competitiveness but this should no longer be achieved through low labour costs.”
The minister said real wages should rise by at least 2.5 to 4.5 percent per year in the coming period to boost the contribution of domestic spending in the overall economy. (Reporting by Gergely Szakacs Editing by Jeremy Gaunt)