The Socialists have up to HUF 300-350bn in spending cuts and revenue boosters up their sleeves to be introduced after the new government is formed, a source close to the government told the press yesterday.
Measures could include cutting the cost of government administration by reducing the number of ministries and freezing public sector wage growth. Revenues could be boosted by increasing middle bracket VAT (from 15% to 20%) and hiking simplified business tax.
The planned budget measures could help in reaching this year's budget deficit target but without more deep strucutal refomrs the mid term goals are not feasible, according to Napi Gazdasag. The Hungarian forint firmed yesterday to the potential austerity measures and a credit analyst from S&P, Kai Stuckenbrock also saw the leaking budget reform information positively, if implemented. As the news has been priced in yesterday, we do not expect major price reaction today.