The must-have newsletter about Hungary

NBH PUTS 2018 BUDGET DEFICIT SLIGHTLY UNDER TARGET

Hungary’s budget deficit could reach 2.2-2.3% of GDP this year, a little under the 2.4% target in the budget act, the National Bank of Hungary (NBH) said in a biannual report. The central bank said in the Public Finance Report that its projection would depend on whether reserves in the Country Protection Fund are tapped.
Tax revenue is expected to exceed the target in the budget act by the equivalent of 0.6% of GDP, supported by revenue from corporate taxes as well as taxes on consumption and on labour, according to the report. Pay rises pushed forward in the healthcare sector, vouchers awarded to pensioners, a subsidy for winter utilities bills and higher spending by budget-funded institutions could lift expenditures over targets, but these effects could be countered, in part, by lower than expected spending on fostered work programmes and disability payments, the NBH said. The NBH said the 1.8%-of-GDP deficit targeted in the 2019 budget act is achievable, but projected that revenue would be under the target by the equivalent of 0.2% of GDP as wage growth slows, affecting payroll tax targets. This could be balanced by higher European Union transfers and lower co-financing costs for EUfunded projects, it added. The NBH sees Hungary’s public debt as a ratio of GDP declining to 72.4% at the end of 2018 and approaching 70% at the end of 2019.