The 4.5%-of-GDP deficit is significantly higher than the targeted 3.8% laid out in the convergence program. Prime Minister Viktor Orbán announced at the beginning of the year that the government met the deficit target of 3.8% of GDP for 2010. However, in mid-February, the National Economy Ministry came out with a report on local council deficits, stating that the cumulated deficit of Hungary’s local governments was some HUF 60 billion more than previously anticipated.
According to origo.hu, the other reason for the deficit jump might be the loose budgetary policy of state-owned institutions, as many of them started to pay institutional debts at the beginning of the year, and such payments need to be accounted for 2010, thus increasing the deficit for last year, origo.hu wrote.
However, the portal notes that a possible higher deficit for 2010 is not endangering this year’s deficit target. According to analysts, with rechanneling private pension fund assets to the state budget, a surplus of about 5% is theoretically possible – given the state didn’t take over several hundred billions of forints in debts from state railway company MÁV and public transportation company BKV and carried on with strict fiscal policy.
At the same time, exceeding the deficit target with nearly 0.5 percentage point might draw investors’ attention to the fact that the government has difficulties lowering the deficit target to below 4% of GDP without one-off extraordinary measures, such as crisis taxes and the nationalization of pension fund assets, the portal said.
Official data on last year’s budget deficit will be published on April 1, and that is when the government is obliged to send it to Brussels. However, it is only preliminary data, and more accurate numbers will be sent again in October. The final figure therefore might differ from the current assumptions, the portal noted.
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