Lawmakers considerably modified Hungary’s budget

Lawmakers approved amendments to the 2023 budget act on Friday. The amendments were approved with a vote of 131 for, 54 against and no abstentions. This year’s revenue target was raised to 36,375.9 billion forints (EUR 95.5bn) from 31,073.7 billion in the 2023 budget act approved by lawmakers last July. The expenditure target was raised to 39,776.1 billion forints from 33,425.8 billion.

The new deficit target is 3,400.2 billion forints, widening from 2,352.1 billion. The amended legislation contains a provision mandating a reduction in the 2023 accrual-based deficit target if forecasts point to GDP growth over the 1.5 percent assumption. The amended legislation targets a reduction in year-end state debt, relative to GDP, to 69.7 percent in 2023.

The latest data released by the National Bank of Hungary (NBH) show Hungary’s state debt stood at 73.3 percent of GDP at end-2022. The amended legislation targets net expenditures on debt servicing of 2,116.6 billion forints, up from 1,805.3 billion in the act approved in July. The new expenditure target for a fund established to protect the regulated utilities price scheme for households is 2,580.0 billion forints, a multiple of the 670.0 billion target in the July act. The amended legislation targets 1,458.2 billion forints in expenditures from the fund to protect household utilities prices and 249.0 billion for private sector support. Compensation of 399.6 billion forints is earmarked for central budget-funded institutions and 144.7 billion for local councils. Support for state-owned companies is set at 178.2 billion forints and for institutions maintained by churches and civil organisations at 150.3 billion forints.

Central budget support for the fund is set at 1,168.3 billion forints in the amended legislation, while payments, contributions and windfall profit taxes from companies in the energy, mining, telecommunications, airline and pharmaceutical sectors will cover the rest of the fund’s expenditures. Expenditures of a fund established to bolster the country’s defence remain at 842.0 billion forints in the amended legislation. Expenditures of the pension insurance fund are set at 5,554.6 billion forints in the amended legislation, up from 4,902.6 billion in the July budget act.

Expenditures on state investments are targeted at 580.0 billion forints, more than double the 257.2 billion in the July budget act. The amended legislation earmarks 17.1 billion forints in expenditures for the newly established Integrity Authority. The July budget act assumed GDP growth of 4.1 percent and 5.2 percent average annual inflation. The NBH put 2023 average annual inflation in a range between 15.0 percent and 19.5 percent in a forecast published earlier in the week.