Hungarian government reports deficit increase, minister sees positive impact of inflation figures

Márton Nagy national economy minister deficit inflation

Márton Nagy, the national economy minister. Photo: MTI

The finance ministry said in a preliminary data release on Monday that a 49 billion forint surplus for May brought Hungary’s cash flow-based general government deficit to 2,548.5 billion forints at the end of the month. The Central Statistical Office (KSH) said on Monday that Hungary’s annualised consumer price index reached 4.0 percent in May.

May surplus brings general govt deficit to HUF 2,548.5 bn

The central budget had a deficit of 2,559.7 billion forints at the end of May and the social security funds were 104.3 billion forints in the red, but separate state funds were 115.5 billion forints in the black.

Interest expenditures, which included large payments on retail government securities, came to 1,760.6 billion forints in January-May, up 659.4 billion forints from the same period a year earlier, the ministry said.

The ministry said expenditures for European Union-funded programmes reached 801.9 billion forints, while transfers from Brussels came to 546.2 billion forints.

The ministry said revenue from taxes and contributions was up by 9.9 percent from the base period.

The ministry affirmed the government’s commitment to reducing the deficit and state debt, noting an earlier decision to postpone 675 billion forints in state investments to achieve the 4.5 percent-of-GDP deficit target, while moving ahead with projects worth several billion forints this year.

The budget continues to ensure the resources necessary to protect pensions and family subsidies as well as to keep the system of regulated household utilities in place, the ministry said.

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Hungary CPI 4.0 pc in May

Headline CPI reached the 3.0 percent +/-1 percentage point tolerance band of the National Bank of Hungary (NBH) in January after peaking at 25.7 percent a year earlier, supported by government measures and central bank monetary policy.

Food prices rose by 1.0 percent in May. Household energy prices fell by 2.4 percent. Gas prices were 4.7 percent lower and electricity prices declined by 2.9 percent.

Consumer durable prices edged down 1.7 percent.

Prices in the category of goods that includes vehicle fuel rose by 5.1 percent as motor fuel prices increased by 9.2 percent.

Harmonised inflation, adjusted for better comparison with other European Union member states, reached 3.9 percent.

Core inflation, which excludes volatile fuel and food prices, was 4.0 percent.

The CPI calculated with a basket of goods and services used by pensioners was 3.9 percent.

Month on month, consumer prices edged down 0.1 percent.

Commenting on the data, Márton Nagy, the national economy minister, said inflation had “collapsed” as a result of targeted government measures such as mandatory discounts at big supermarket chains and an online platform for monitoring food prices. The price competition generated by government measures kept the inflation low, he added.

“Low inflation benefits families and the economy as well,” the ministry quoted Nagy as saying. The minister added that “in a positive chain reaction” in the national economy, real wages had been rising since September increasing the value of a family’s income.

The 4 percent inflation is higher than in April (3.7 percent) and March (3.6 percent). In other words, inflation is clearly accelerating, in such circumstances it is strange to talk of it “collapsing”, and is expected to rise further in the coming months.