The Organization for Economic Cooperation and Development warned Hungary today that it cannot afford to loosen fiscal policy that has seen it rein in its budget deficit to among the lowest in Europe, according to dpa. OECD researcher Pierre Beynet praised Hungary's recent fiscal consolidation while in Budapest for the publication of the latest economic report on Hungary by the influential Paris-based club of 30 developed nations. With general elections due in April, however, Beynet warned that the country could be in danger of backsliding with election looming. "It is very important to us that the next government sticks to the present very prudent fiscal policy," said Beynet, a co-author of the report. Even if it does, the OECD predicts that Hungary will end this year with a budget deficit of 4.1 per cent, above the government target of 3.8 per cent. Hungary's Socialist-backed crisis management government has slashed public spending and pensions since taking office last April, and is confident that it met its budget deficit target of 3.9 per cent of gross domestic product last year. The government - and some international analysts - have recently claimed this puts Hungary in a better position than many countries in Europe to grow once again when the global downturn eases. However, the budget deficit is only one of Hungary's problems. It still has government debt of around 80 per cent of GDP, and servicing this is a major drain on the national budget of a country whose economy shrank by over 6 per cent last year. The OECD report also highlighted low participation in the labour market as an issue that needs to be addressed by the next government. Hungary has one of the lowest rates of job market participation in the EU, at little over 50 per cent. Of 10 million Hungarians, 3 million are retired.
