Hungary's deficit could rise to almost 7 percent

The Hungarian budget deficit could widen to 6.8 percent this year, significantly exceeding the official targets. This was stated by Prime Minister-designate Péter Magyar on May 5, citing documents available to his team, as reported by the financial portal Portfolio.hu. In a post on social media, Magyar explained that the expected deficit was well above the original government target of 3.9 percent and also above the forecast of 5 percent, which was later raised. The deficit calculated on a cash flow basis rose to 1.3 trillion forints in March, equivalent to 3.45 billion euros. This was the highest monthly deficit ever recorded. The budget deficit thus already reached 3.4 trillion forints or 83 percent of the annual target, as the Ministry of Economy announced two days before the election. Dispute over latest spending Magyar accused the outgoing cabinet of accelerating spending in the final weeks of its term of office. Among other things, this involved new financial obligations and additional liabilities before the handover of power. Gergely Gulyás, the head of the Prime Minister's Office, rejected these accusations. In recent days, the controversy surrounding the National Culture Fund in particular has intensified. The fund, administered by the Ministry of Culture and Innovation, provided 17 billion forints to public figures, organizations with ties to the Fidesz party and various projects. These included eating competitions and the composition of a Champions League anthem by folk musicians for the final on May 30 in Budapest. Some of the funds were transferred after the election. Magyar warned that short-term spending by the outgoing cabinet could put additional strain on the new government's budget. He called on ministry officials not to enter into any new commitments and to limit spending to what is necessary for basic state operations until a new government is formed. New government under pressure If the deficit path outlined by Magyar's team is confirmed, the result would exceed previous market expectations. Analysts had already expected a significant deterioration, but most forecasts were between 5.5 and 6 percent. A deficit of almost 7 percent would require a much greater fiscal adjustment than previously assumed. This increases the pressure on the new government to stabilize Hungary's public finances and support economic growth at the same time. Some analysts have already criticized election promises made by the Tisza party, including the planned reduction in the income tax rate from 15 to 9 percent for minimum wage earners and low earners. However, István Kapitány, the designated Minister of Economy and Energy, did not give a specific date for this. The measure is not expected to take effect until 2027 at the earliest. Magyar announced that his government would quickly ensure greater budgetary discipline. There are plans to review spending, contracts and state-owned companies in order to reduce waste and increase efficiency. He had previously stated that Tisza would carry out a comprehensive budget review and present a revised version of the budget within the first 100 days. The post Hungary's deficit could rise to almost 7 percent appeared first on ostwirtschaft.de.