Hungary slashes deficit in 2010 budget
(BUDAPEST) - The Hungarian parliament approved a draft 2010 austerity budget late Tuesday, targetting a deficit of 3.8 percent of gross domestic product (GDP), one of the lowest in the European Union.
The budget includes severe cuts for public transport and municipalities.
But the ruling Socialists also increased forecast spending by shunning plans to reduce funds for school lunches, while also slashing the 25-percent tax on natural gas to five percent.
The draft predicted 2010 revenues at 12.6 trillion forint (45.8 billion euros, 67.6 billion dollars) and spending at 13.5 trillion forint, leaving a deficit of 870.3 billion forint, or 3.8 percent of GDP.
The European Commission this week forecast that Hungary's deficit will reach 4.1 percent of GDP in 2009 and expand to 4.2 percent in 2010.
The figures were passed with 200 votes from Socialist and Liberal deputies, against 156 'nays' from the opposition and one abstention.
The final budget vote will be held on November 30.
The 2010 budget was drawn up based on a forecast of a 0.9-percent contraction of the economy while inflation is expected to fall short of the targeted three percent.
The opposition conservative Fidesz party, which is likely to win next year's general elections, has already vowed to amend the budget once in power.
Prime Minister Gordon Bajnai was set to keep the 2010 budget on an austerity track to meet the terms of a 20-billion-euro International Monetary Fund-led (IMF) bail-out for Hungary.
Budapest turned to the IMF for help last October when its resources dried up as foreign investors fled Hungarian markets and the country came close to bankruptcy.
Although spending cuts and positive global sentiment helped Hungary's currency, the forint, strengthen by over 15 percent until October -- from all-time lows of 317 forint to the euro in March -- the country has still not come out of the woods.
Its public debt remains high at around 80 percent of the GDP and further cutbacks will be needed to lower it, analysts say.
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