2017 budget bill targets deficit of EUR 3.7bn

Budapest (MTI) – Hungary’s budget is expected to run a cash-flow-based deficit of 1,166.4 billion forints (EUR 3.7bn) next year, well above the 761.6 billion gap targeted for 2016.

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The details of 2017 budget bill, submitted to Parliament on Tuesday, were published later in the evening.

The 2017 budget bill targets revenue of 17,374.9 billion forints and expenditures of 18,541.3 billion.

As announced earlier by the government, the budget is separated into three pillars: revenue and spending for the day-to-day operations of the state, as well as for investments funded by the state and by the European Union.

Revenue and expenditures for the operation of the state both balance out at 14,679.7 billion forints.

The pillar for state-funded investments shows revenue of 1,132 billion and expenditures of 1,604.4 billion, with a 472.4 billion deficit.

The pillar for EU-funded investments shows revenue of 1,545.2 billion forints and spending of 2,239.2 billion, with a deficit of 694 billion.

The government classifies 2,496.5 billion forints of next year’s VAT as operating revenue and 1,034.6 billion forints as revenue related to investments. The government recently announced plans to reduce from next year the VAT rates on milk, eggs and poultry from 27 percent to 5 percent and the rates for internet service and catering to 18 percent.

Revenue from personal income tax is targeted at 1,787.4 billion forints, compared with 1,658.4 billion forints in 2016.

Revenue from the bank levy is set to fall to 66.5 billion forints next year from this year’s 79.2 billion forints.

The budget chapter on revenue and expenditures of state assets shows spending of 27.0 billion forints by the national asset management agency established to buy homes on which lenders have foreclosed and allow borrowers to continue to reside in them as tenants.

A further 18.5 billion forints is allocated for real estate investments and purchases and 12.7 billion forints for acquisition of equity and capital raises by the National Asset Management Company MNV.

The budget bill targets 298.6 billion forints for the fostered work programme, down from 340.0 billion forints in the 2016 budget.

It targets 180.6 billion forints for the introduction of a career-path model and measures affecting salaries for some branches of the public sector.

Just under 100 billion forints is allocated for a capital raise at the project company for the upgrade of the Paks nuclear power plant.

The net cost of servicing Hungary’s public debt is expected to be 959.6 billion forints next year. The bill shows the general government’s cash-flow-based primary balance, which excludes interest costs, coming to negative 292.7 billion forints next year, or -0.8 percent of projected GDP.

The bill notes, however, that according to the EU’s accrual-based ESA accounting rules, the budget is expected to run a primary surplus of 0.6pc of GDP in 2017. The ESA deficit target is 2.4 percent, while ESA interest expenditures are projected reaching 3.0 percent of GDP.

Year-end public debt as a percentage of GDP is expected to fall to 71.9 percent next year from a targeted 73.5 percent at the end of 2016, continuing on a downward path as required by the constitution.

The government projects a marked 9.1 percent increase in gross fixed capital formation, or investments, next year, after a 1.8 percent fall forecast for this year.

The prime minister’s office and its related institutions will altogether get 949 billion forints. The budget chapter on the office targets 47 billion forints in revenues. The budget earmarks 33 billion forints for the prime minister’s office alone and targets operating revenue of 4 billion forints.

The bill allocates 177.33 billion forints for the ministry of foreign affairs and trade, targeting 8.1 billion forints in own revenue. A total of 60.69 billion forints will go towards funding Hungary’s representative offices. The budget targets 7.31 billion forints in operating revenue in this area. As regards the management of the ministry, the bill shows operating revenue of 121 million forints and spending of 9.26 million forints. A total of 180 million forints are penciled in as operating costs for the Institute for Foreign Affairs and Trade.

In health-care spending, funding for general practitioners’ surgeries will rise by 112 billion forints to 746 billion forints. The government will spend 2,059 billion forints on the health insurance fund compared with 1,963 billion forints in 2016.

Spending on local governments will rise by over 6 billion forints from this year’s 662 billion forints to 668.38 billion forints.

The police and security forces that fall under the jurisdiction of the interior ministry will see a significant budget increase while spending on the ministry itself is set to drop slightly in 2017. The police forces will get 206 billion forints and the TEK counter-terrorism force 12.6 billion forints for personnel expenses. The latter will be given 2.3 billion forints for material expenditures next year.

The defence budget will increase by 51 billion forints to 350 billion forints, or 0.94 percent of GDP. In 2012, the government adopted a resolution in which it pledged to increase defence spending to 1.4 percent of GDP by 2022.

Pension funding for women who choose to retire early will increase to 233 billion forints from 195 forints in 2016. Spending on old-age pensions will rise from this year’s 2.473 billion forints to 2.501 billion forints next year. Orphan support will drop slightly from 34 billion forints to 31 billion and funding for widow’s pensions will be 334 billion forints compared with 338 billion forints in 2016.

Photo: MTI

Source: http://mtva.hu/hu/hungary-matters