EU Council recommends Hungary to correct deviation from fiscal deficit
On Friday the EU Council issued a recommendation on measures to correct a significant budgetary deviation in Hungary, the Council said in a press statement.
The Council recommends that Hungary take measures to ensure that the nominal growth of net primary government expenditure does not exceed 2.8 percent in 2018, representing an annual structural adjustment of 1 percent of GDP.
This will put Hungary on an appropriate adjustment path towards its medium-term objective, the Council said. Any windfall gains should be used for deficit reduction, and budgetary consolidation measures should secure a lasting improvement.
The Council set a deadline of October 15, 2018 for Hungary to report on action taken.
The Council issued a similar recommendation to Romania after establishing that both countries are responsible for significant deviations from their medium-term budgetary objectives (MTOs), as agreed under the Stability and Growth Pact, the EU’s fiscal rulebook.
The Council established that in 2017 the growth of Hungary’s government expenditure was well above the expenditure benchmark set by the Council in July 2016, and Hungary’s structural balance deteriorated to -3.1 percent of GDP, 1.6 percentage points of GDP away from its -1.5 percent of GDP medium-term objective.
The data are from the Commission’s spring 2018 economic forecast and 2017 budget data.
Both indicators suggest a significant budgetary deviation, the Council said.
The medium-term objective (MTO) and the significant deviation procedure are both part of the pact’s preventive arm.
The focus of budgetary surveillance is on structural balances, i.e. budgetary balances corrected for cyclical, one-off and temporary factors.