At the end of March the cumulative deficit of the central subsystem of public finances was 198.1 billion forints, which is in line with the expectations of the Ministry for National Economy. The processes of the first quarter indicate that public finances continue to be stable, which should also remain the case with regard to the whole financial year.

During the first three months of the year the central budget and social security funds closed with a deficit of 168.6 billion forints and 45.9 billion forints, respectively, while extra-budgetary funds closed with a surplus of 16.4 billion forints. In comparison, during the same period in 2016 the central subsystem of public finances posted a deficit of 125.8 billion forints.

The difference between the January-March balance of the two years was jointly influenced by several factors. Of these, the effects of the six-year wage agreement concluded in November of last year are already being felt: personal income tax revenues have increased significantly compared to last year. In addition, one-off items such as revenue from the sale of farmland and the repayment of EU funding in arrears have also appeared in the budget. At the same time, however, revenues from value added tax have fallen in view of the fact that because of new regulations in force from 1 January that reward “good taxpayers”, the tax authority is effecting VAT reimbursements within 45 days as opposed to the previous 75 days. With regard to expenditure, one may primarily highlight EU costs relating to chapter-administered appropriations, which are almost entirely linked to operative programmes for the 2014-20202 period. These played a significant role in the fact that the central subsystem of public finances posted a deficit of 378.5 billion forints in March alone.

The target deficit for this year according to EU methodology remains 2.4% of GDP. This is realistic and achievable according to the favourable macroeconomic and budget forecasts, as also confirmed by stable investor confidence.

(Ministry for National Economy)