Breaking: Hungarian government raises budget deficit target

Due to the need to increase spending to protect key programmes in the budget amid the current crisis situation, the government has decided to raise the budget deficit target to 5.2% of GDP, which is 1 percentage point lower than the shortfall last year, but 1.3 percentage points higher than this year’s original target.

The finance ministry’s statement cited the “dangerous international situation” which had put the budget under extraordinary strain.

It cited the high cost of protecting subsidised household utility bills, while national defence spending hit 2% of GDP this year with the added pressures of the war in Ukraine.

The ministry noted that for years Hungary had asked the European Commission to reimburse the cost of protecting the EU’s external border, by now a bill of HUF 650 billion (EUR 1.68 billion). The deficit would be almost 1 percentage point lower if it did so, the statement added.

Also, it would make a big difference to budget flexibility if EU payments which Hungary is owed were unblocked, it added.

The ministry said that the “stable foundations of the Hungarian economy” meant that the country’s future outlook was positive, with employment still “extremely high” and exports at record levels.

The statement underlined that inflation would fall to single digits by the end of the year, while the current account balance was improving steadily. Hungary, it added, would return to a growth path by year-end.

The government is committed to improving the balance indicators and lowering the budget deficit and public debt each year, the statement said.

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