Favourable economic trends experienced hitherto and expected for the future guarantee fiscal balance and stability. Including a deficit of HUF 137.4bn in the month of May, the central sub sector of the state budget closed the period January-May 2019 with a deficit of HUF 176.4bn, corresponding to 17.7 percent of the annual deficit target. The ESA full-year deficit target of 1.8 percent of GDP will be attainable.

As a result of the wage agreement concluded at the end of 2016, 4.5 million people are now in employment in Hungary. This favourable trend has been coupled with dynamic, double-digit earnings growth. Thanks to this as well as tax reductions and incentives, more and more money has been left at families. This fuels consumption which trend has been reflected in the steady upward trend of retail sales in the past five-and-a-half years. The following data show the effect of the government’s housing programme:  in Q1 2019 the number of newly built homes was up by 8 percent year-on-year, the volume of investment soared by 26 percent and the country’s GDP grew by 5.3 percent – the best figure of the past two decades – in the same period. Besides these factors, fiscal revenues grew -- despite tax cuts -- as a result of government measures aiming to increase economic transparency.

As a consequence, fiscal revenues from VAT were up by HUF 367.3bn, PIT by HUF 91.3bn, excise tax by HUF 46.5bn, and payroll taxes (social contribution tax as well as pension, healthcare and labour market contributions) by HUF 209.2bn, compared to the corresponding period of the previous year. In the aforementioned period, fiscal expenditures related to EU-funded projects totalled HUF 608.1bn, while transfers from Brussels totalled HUF 305.9bn. Accordingly, Hungary continues to pre-pay amounts expected from  EU funds, while the implementation of state-funded investment projects aiming for various social and economic goals continue (such as the Modern Cities Programme, the modernization of rail networks, various projects in Pest county and investment-promotion incentives aiming to boost corporate efficiency.)

In the period January-May 2019, the central government budget accumulated a deficit of HUF 253.4bn, while Social Security Funds and Extra-Budgetary State Funds posted surpluses of some HUF 25.5bn and HUF 51.5bn, respectively.

(Ministry of Finance)