ministry of finance1 budapest stock exchange roadshow june 2002, london mr. csaba lÁszlÓ minister...
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MINISTRY OF FINANCE 1
Budapest Stock Exchange Budapest Stock Exchange RoadshowRoadshow
June 2002, LondonJune 2002, London
MR. CSABA LÁSZLÓ
MINISTER OF FINANCE
REPUBLIC OF HUNGARY
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MINISTRY OF FINANCE 2
Where Are We Now?Where Are We Now?
Growth process bottoming out
Fiscal positions
External balance
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MINISTRY OF FINANCE 3
Main Policy PrinciplesMain Policy Principles
Predictability
Focusing on competitiveness
Increasing transparency
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MINISTRY OF FINANCE 4
Towards the European UnionTowards the European Union
Negotiations to be finished in 2002
Judgement of Hungary’s performance should not depend on others
Expected entry in 2004
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MINISTRY OF FINANCE 5
Annual GDP Growth RateAnnual GDP Growth Rate
3,0
3,5
4,0
4,5
5,0
5,5
1998 1999 2000 2001 2002 2003 2004
Per
cen
t
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MINISTRY OF FINANCE 6
General Government DeficitGeneral Government Deficit(in % of GDP, ESA95 standard)(in % of GDP, ESA95 standard)
0
1
2
3
4
5
6
7
1998 1999 2000 2001 2002 2003 2004
Per
cen
t
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MINISTRY OF FINANCE 7
Current Account BalanceCurrent Account Balance(in % of GDP)(in % of GDP)
-6
-5
-4
-3
-2
-1
0
1998 1999 2000 2001 2002 2003 2004
Per
cen
t
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MINISTRY OF FINANCE 8
Monetary ConditionsMonetary Conditions
Inflation targeting
Substantial deceleration of inflation
Declining base rate
Towards the Eurozone
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MINISTRY OF FINANCE 9
Consumer Price IndexConsumer Price Index
100
105
110
115
120
1997 1998 1999 2000 2001 2002 2003
118,3
105,7
109,2
109,8110,0
114,3
104,5
118,4
110,3
111,2
110,1
106,8
105,3
103,9
band: +/- 15%from May 2001
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MINISTRY OF FINANCE 10
Short-Term Policy GoalsShort-Term Policy Goals
Back to the growth potential
Substantially declining fiscal deficit from 2003
Further decreasing inflation
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MINISTRY OF FINANCE 11
Short-Term Policy StepsShort-Term Policy Steps
Fiscal policy:
Reduction of tax burdenEntrepreneur-friendly tax administrationStrengthening of tax enforcementMore efficient use of government resources
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MINISTRY OF FINANCE 12
Short-Term Policy StepsShort-Term Policy Steps
Structural policy:
Supporting SMEsShrinking gap between regionsPromoting R&D activitiesInvestor-friendly environment
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MINISTRY OF FINANCE 13
Short-Term Policy StepsShort-Term Policy Steps
Income policy:
Balanced income distribution
Operative framework for interest reconciliation among economic actors
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MINISTRY OF FINANCE 14
Policy CoordinationPolicy Coordination
Greater role of fiscal policy in demand management
Avoid substantial further appreciation in real exchange rate of HUF
Policy rates declining in line with inflation
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MINISTRY OF FINANCE 15
ReReinventinginventing the Budapest the Budapest Stock ExchangeStock Exchange
Supporting local investor demand for shares
Providing attractive supply on the BSE
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MINISTRY OF FINANCE 16
Supporting DemandSupporting Demand
Towards a mature savings structure
The role of private pension funds
Creating liquidity
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MINISTRY OF FINANCE 17
Savings SSavings Structure tructure DevelopmentsDevelopments
Gross financial assets of households below 50% of GDP
9% of assets in investment funds, 2.5% in shares
Increasing role of life assurance and pension funds (15% of assets)
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MINISTRY OF FINANCE 18
The Role of Pension FundsThe Role of Pension Funds
Dynamic growth helped by continuing reform
Contribution to be increased to 8% of gross wages
Compulsory participation to be reintroducedLess than 10% of portfolio in BSE traded
shares
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MINISTRY OF FINANCE 19
Where is the Liquidity?Where is the Liquidity?
Liquidity suffers globally in bear markets
60% drop on BSE is comparable to regional experience
Elimination of capital gains tax may help
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MINISTRY OF FINANCE 20
Creating SupplyCreating Supply
Re-starting privatisation via the BSE
Encourage private companies to list shares
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MINISTRY OF FINANCE 21
The Last Wave of PrivatisationThe Last Wave of Privatisation
Government is committed to privatisation
Few evident short-term candidates for listing
Regulatory risk is considerable
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MINISTRY OF FINANCE 22
Private Companies: A Special Private Companies: A Special SituationSituation
Privatisation and greenfield FDI brought domination of strategic investors
2/3 of top 200 companies unlikely to be listed
How to make the BSE more representative of the economy?
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MINISTRY OF FINANCE 23
Encouraging Private ListingsEncouraging Private Listings
Analysing reasons is important
Government to ease the burden of listing
Psychological barriers hard to break
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MINISTRY OF FINANCE 24
Where Do We Go?Where Do We Go?
Impressive performance in the past 5 years
Present minor anomalies to be corrected
Return to long-term sustainabe growth path
Convergence to European Union standards