National Bank of Hungary
Photo: Daily News Hungary – Alpár Kató

The government’s budget deficit target of 1.8 percent of GDP set out in the 2019 budget bill is realistic, Hungary’s central bank has said.

Downside risks are possible on tax and excise revenue but state contributions towards development projects which receive European Union funding are likely to be lower than expected,

the National Bank of Hungary (NBH) said in its Budget Report released on Thursday.

Central government revenues may be lower by 0.6 percent of GDP, but spending is likely to be 0.5 percent of GDP below target, the bank said. Other factors, including savings from the Country Protection Fund could improve the budget balance by a further 0.1-0.2 percent of GDP, it added.

The 1.8 percent deficit target for next year compares with a 2.4 percent deficit target this year and conforms to targets set out in the government’s Convergence Programme.

The NBH noted that

the budget calculates with 4.1 percent economic growth for 2019, which is above the NBH’s 3.5 percent growth estimate.

Growth in household consumption is likely to be below the budget estimate but gross fixed capital formation stemming from corporate and household investments could significantly boost GDP, the report said.

Budget estimates for employment and wage growth are again higher than the NBH forecast and the government’s projection of inflation is lower.

The public debt, calculated with an unchanged forint to euro exchange rate from last year and based on European calculation methodology, is set to drop from 73.6 percent of GDP at the end of 2017 to 72.5 percent by the end of 2018. It is expected to be 70.3 percent by the end of next year, the report added.

Source: MTI

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