Thanks to the Government’s prudent fiscal policy, the accumulated deficit of the central sub sector of the state budget fell to a record low level of HUF 2.4bn. This figure has been unprecedented for some fifteen years. In light of favourable fiscal data compiled recently, the full-year ESA deficit is set to be better than formerly anticipated; therefore the Government has modified its fiscal target from 2 percent to 1.7 percent of GDP.

In the initial nine months of this year, the central budget accumulated a deficit of HUF 95.5bn, while Social Security Funds and Extra-Budgetary State Funds posted surpluses of HUF 21.3bn and HUF 71.8bn, respectively. In the month of September, the central sub sector posted a surplus of HUF 271.6bn, whereas one year before the deficit in the period January-September was HUF 954.6bn and the September deficit was HUF 39.7bn.

The difference between data of 2015 and 2016 is attributable to two major factors. On the one hand, EU funds in 2015 were pre-financed by the state budget for beneficiaries, and these were transferred by the EU to Hungary’s budget this year. On the other hand, revenues turned out to be higher and expenditures turned out to be lower than formerly expected. The latter factor has been a key determinant for Fitch Ratings and Standard and Poor’s to restore Hungary’s investment-grade status.

Month after month, the Hungarian economy has delivered good results: the fiscal deficit is at a fifteen-year low, the government debt ratio is declining, economic growth is above the EU average, the unemployment rate recently hit a record low and wages in real terms are rising. Subdued inflation boosts consumption growth, which – together with pro-transparency Government measures (such as on-line cash registers and EKÁER) – contributes to higher fiscal revenues.

The new deficit target of 1.7 percent, which was officially modified in the EDP Report of 30 September, reflects real economic and fiscal processes and therefore it is attainable.

(Ministry for National Economy)