* Plan follows cuts in payroll, corporate taxes, minimum
* Rebate offered for 20 pct rise in company lending over 2
* Analysts see world-beating stimulus in 2017 pre-election
* Local bank shares post modest gains
* Government to upgrade 2017 GDP growth forecast -minister
(Adds upgrade of 2017 growth forecast)
By Gergely Szakacs
BUDAPEST, Dec 1 Hungary will offer banks that
substantially boost lending to companies a tax rebate, the
government said on Thursday, as Prime Minister Viktor Orban
rolls out "world-beating" stimulus measures ahead of an election
The proposal to waive some financial transactions tax
payments follows cuts in payroll and corporate taxes for
companies and hikes in the minimum wage to combat weaker
third-quarter growth and deteriorating competitiveness.
Underscoring the need for action, Economy Minister Mihaly
Varga said economic growth would come in below the government's
2.5 percent projection this year and is now seen in the 2 to 2.5
percent range depending largely on fourth-quarter consumption.
"We will table a modification saying that for banks whose
corporate loan stock increase exceeds a given percentage, we see
a possibility of foregoing part of the financial transaction
tax," Varga told reporters on the sidelines of a conference.
The minister said the rebate, which would carry an upper
limit, would be available to banks that increase their corporate
loan stock by at least 20 percent.
The ministry said banks would need to show that kind of loan
growth in two years compared to end-2015 levels to be eligible
for the rebate, which could not exceed 80 percent of the
original tax obligation, or 300 million forints.
The tax had been due to raise 202.5 billion forints ($690
million) in 2017.
Varga later told a parliamentary committee hearing that 2017
economic growth could come in significantly higher than the
government's earlier 3.1 percent forecast, but did not provide a
specific estimate. He said inflation could also accelerate.
At 1440 GMT, Hungarian bank shares were marginally stronger,
with OTP Bank up 0.3 percent and smaller rival FHB
rising 0.2 percent, off earlier session highs.
The proposed measure comes as the central bank, run by
strong Orban ally Gyorgy Matolcsy, prepares to phase out a
massive Funding for Growth Scheme that provided 2.46 trillion
forints of cheap funding to tens of thousands of small firms.
Even before the latest announcement, economists at HSBC said
Hungary's fiscal stimulus, estimated at 1.5 to 2 percent of
gross domestic product, would probably be the largest globally
for the 2017 pre-election year.
"Economic growth in Hungary is forecast to accelerate to
around 3 percent year-on-year by mid-2017, arguably with upside
risks as the government targets to achieve '3-5 percent GDP
growth as early as in 2017' with the help of its aggressive
fiscal stimulus package," HSBC's analysts said.
In October, the government cut its 2016 budget deficit
target to 1.7 percent of GDP after a big September surplus.
($1 = 294.78 forints)
(Editing by Catherine Evans)