BUDAPEST: The 2.4 percent ESA deficit targeted by the government in the 2017 budget bill amounts to a considerable easing compared to a dropping deficit trend set in Hungary’s 2015 convergence plan or expectations outlined in an earlier central bank report, the national bank (NBH) said in its Budget Report published on Monday.
Some budget revenues could fall below plan in 2017 so the targeted deficit could be reached if part of the reserves in the budget’s Country Protection Fund — the equivalent of 0.1 percent of GDP or about half of the 60 billion forints (EUR 192.5m) fund designed against unforeseen risks — remain unspent, the NBH concluded. The NBH’s projections for taxes on consumption as well as payroll taxes are under the targets in the budget bill.
On the expenditure side, the central bank sees an overshoot of spending on the revamped home purchase subsidy scheme, but this could be balanced out with lower co-payments on EU development funding. The report projects preliminary allocations of EU funds of 1,678 billion forints, under the 2,239 billion forint target in the budget bill.
The NBH analyses the 2017 budget bill in the report it prepared to help the work of the Fiscal Council which members include the NBH governor. Parliament is scheduled to take the final vote on the bill on June 13. According to preliminary data the ESA deficit was 2 percent in 2015 and a similar 2 percent is targeted by the government for 2016. Gross government debt could drop from 75.3 percent at the end of 2015 to 74.5 percent by the end of this year and to drop another 0.8 percentage points to 73.7 percent at the end of 2017.
The NBH puts GDP growth at 3.0 percent for 2017, under the 3.1 percent growth rate in the budget bill. The NBH’s 2.8 percent projection for the increase of household spending is also under the 3.7 percent budget bill target. There is a marked difference in investment and inflation figures, too. The budget bill puts investment growth at 9.1 percent next year, while the central bank sees 4.1 percent growth. Inflation is projected to reach 0.9 percent in 2017, under the NBH’s 2.4 percent forecast. New tax measures may explain the difference, the NBH said.
