(MTI) – Hungary registered a budget deficit of 929.2 billion forints (EUR 3.13bn), excluding local councils, last year, about 200 billion forints less than previously planned, Economy Minister Mihaly Varga said on Friday.
Parliament raised the full-year cashflow-based budget deficit target to 1,125.2 billion forints in December.
The EU-conform deficit as a percentage of GDP can be at most at the 2.7pc-of-GDP government target but could be as low as 2.3 percent, Varga said.
The ratio will not exceed the target even if the EU statistics office Eurostat declares some 2013 spending items as ones raising the EU-conform deficit, the minister said.
The items in question are a 71 billion forint capital injection the state-owned Hungarian Electricity Works (MVM) received in the autumn from the budget to cover the purchase of E.ON’s Hungarian gas business and more than 135 billion forints in budget funding to support the integration of Hungarian savings cooperatives.
Hungary’s joining the ERM2 is not on the agenda, and joining the euro zone may not be an issue until the end of the current decade, Varga said.
The minister said there were one or two banks that may be seriously considering withdrawal from Hungary. The Hungarian banking system is stable, and the ministry does not expect any eventual withdrawal to affect the central budget significantly, he added.
In an interview before Christmas, central bank governor Gyorgy Matolcsy said that four major banks currently active in Hungary could wind up their operations here within the next year and a half.
Varga said that introducing a single-digit personal income tax could be considered seriously in 2015. Although economic growth has started, there seem to be no funds available that could offset the 600 billion forints shortfall the introduction of a 9 percent tax rate would cause in budget revenues, he said.
Prime Minister Viktor Orban said late November that the personal income tax rate could be cut below 10 percent from the current 16 percent within three years.
The forint started the day at around 297.70 and weakened above 299 to the euro by 11.15am before it strengthened slightly, probably on Varga’s announcement of the favourable 2013 deficit figure.
Analysts polled by MTI on Friday said the fresh data was favourable but were mixed in their predictions of whether budgetary corrections could be expected in 2014.
Gergely Suppan, a senior analyst at Takarekbank, said a 2.7 percent budget deficit expected by Varga was realistic, but it could come in as low as 2.3 percent, after positive October-November budget figures and local governments booking surpluses. He said the market had not yet priced in Varga’s announcement, but this can be expected after Jan. 6. when the first investment decisions are made. Suppan said he did not expect budget adjustments this year.
Adam Keszeg, an analyst with Raiffeisen Bank, said whereas recent data gave cause for optimism, there was some risk involved in some items being accounted for under EU rules. Keszeg said he did not rule out budgetary adjustments during the year if the budget “slips”, but he did not expect Hungary to be placed again under the EU’s excessive deficit procedure.
The opposition Socialist Party said that the Orban government had “performed better as far as its austerity package is concerned”, and this explains why last year’s budget deficit came in below expectations.
Sandor Burany, the party’s lawmaker, told a news conference that the government had subordinated everything to meeting the budget-deficit target, and whereas the number itself was smaller, this was achieved at the expense of putting extra burdens on ordinary people.
He insisted that economic growth in 2013 must be seen against the backdrop of an especially weak 2012, and any growth was in fact due to better weather, which boosted farm output, as well as other factors beyond the government’s control.