* Budget Council sees overshoots in 2010-2012
* Puts growth at 1 pct in 2010, around 3 pct in medium term
* Says exclusion of pension payments from budget not viable
(Combines stories, adds quotes, background, detail)
By Marton Dunai
BUDAPEST, Aug 18 (Reuters) - Hungary's fiscal watchdog sees
the country's budget deficit at 4 percent of GDP this year,
above the government's 3.8 percent target.
That goal, set before Hungary halted talks with its lenders
in an IMF/EU financing deal that expires in October, could still
be reached with strict cost controls, Gyorgy Kopits, Chairman of
the Budget Council, said on Wednesday.
But he said moves to exempt costs associated with pension
reforms from deficit calculations -- as requested of the
European Union by Hungary and other east European countries --
were not viable as they would lack market credibility.
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Kopits told a news conference Hungary's deficit goal for
this year was "attainable, give or take a few tenths of a
percentage point, which is within our tolerance limit.
"The key ... is to stick with plans to cut costs, which is
not easy and requires strict cost control from the government."
The country's recently elected centre-right government
confounded markets last month by halting talks with its lenders,
but said it would stick to this year's 3.8 percent target.
It has not yet given details on next year's budget, but
signalled it had no intention of cutting the deficit below 3
percent, which Hungary is required to do under the EU's
Excessive Deficit Procedure (EDP).
The Budget Council, created last year to oversee the
country's fiscal processes, said in a report published on
Wednesday that according to European accounting standards (ESA),
the deficit will be 4.0 percent in 2010, 4.2 percent in 2011 and
3.4 percent in 2012.
In order to help achieve this year's target, the government
aims to collect 200 billion forints ($921 million) in taxes from
the financial sector both this year and in 2011.
The Budget Council said it did not reckon with revenues from
the tax beyond 2010, and this year's projection also assumed the
government fully implemented a 130 billion forints spending
freeze, local government deficits would not overshoot and state
companies would not need additional subsidies.
Neighbouring Romania is struggling to generate expected
revenues from a higher VAT rate as it struggles to reach its own
budget deficit target. []
GROWTH SEEN PICKING UP, CONSUMPTION SLUGGISH
The Council sees Hungary's economic growth at 1 percent this
year, and at 2.9 percent in 2011, followed by annual growth
around 3 percent until 2014.
"In the medium term we continue to see 3 percent growth, but
consumption growth could only be more moderate than that, as the
stock of savings is rising, and on the other hand households'
disposable income is decreasing due to an increase in debt
repayments... and access to new lending could narrow," it said.
The recent proposal by eastern European countries to allow
accounting for payments related to private pension funds outside
the budget was "little more than cosmetic," Kopits told
reporters.
Other council members added that the proposal does not
create more fiscal room for governments, as they would still
have to maintain their primary balances, and markets would not
accept the resulting lower overall budget deficits as credible.
[]
(Reporting by Marton Dunai; Editing by John Stonestreet)
