Hungary’s general government deficit narrows on EU transfers windfall

Hungary’s cash flow-based general government budget, excluding local councils, ran HUF 1,445.1 billion forints (EUR 4.5bn) deficit at the end of December, the Finance Ministry said in the first reading of data on Friday.

The deficit reached 106.2 percent of the 1,360.7 billion forint full-year target.

Hungary’s government has been pre-financing European Union-supported projects to avoid a backup at the end of the 2014-2020 funding cycle. The lag between payouts to recipients and EU transfers had lifted the general deficit over 135 percent of the full-year target by November, but some 890 billion forints from Brussels that arrived in December shored up the gap.

The central budget deficit reached 1,368.8 billion forints while separate state funds had a 7.6 billion surplus and social insurance funds a 83.9 billion deficit.

In December alone, the general government surplus came to around 397.3 billion forints.

During 2018 budgetary revenue from VAT and personal income tax was up 403 billion forints and 257 billion forints, respectively, compared to 2017, while payroll tax revenue climbed by 266 billion. Income from excise tax was up 90 billion forints.

Transfers from the European Union accounted for a 1,430 billion forints income during the year but pre-financing for projects from the Hungarian government was even bigger, reaching 1,886 billion.

Finance Minister Mihály Varga said at a press conference that Hungary could have around 2.0 percent of GDP deficit for the full year, calculated using EU accrual-based accounting rules, better than the original 2.4 percent target. Finance ministry state secretary Peter Beno Banai said final numbers could be available in March at the earliest.

Government debt could fall to around 71 percent of GDP, in the light of a 4.9 percent GDP growth between Q1-Q3 2018 and the 4.6 percent GDP growth expected for 2018, he added.

Varga attributed the good economic performance to government measures such as a six-year wage agreement between employers and workers, government subsidies to home purchases, steps taken to whiten the economy.

As we wrote yesterday, PM Orbán said there are 4.5 million people working in Hungary today, compared with 3.7 million in 2010. If all goes well, the number of job holders could stabilise at 4.5-5 million in the long term, which is near full employment, he added. Read more HERE.

Source: mti