Speaking before Parliament, before lawmakers started a debate of the 2014 budget bill, Varga said the Fiscal Council had said the draft legislation was credible and feasible, but it called attention to some negative risks that could affect elements of revenue and expenditures.
He added that the government believed reserves built in to the budget were sufficient to manage any possible negative effects of risks.
ÁSz acknowledged many positive points in the budget bill and raised objections to just a few, he said, adding that the office’s recommendations, made in good faith, were being considered and the government aimed to act on them in the near future.
ÁSz deputy head Tihamér Warvasovszky told MPs that the budget bill was in line with the constitution and the Economic Stability Act, but said lower-than-expected consumer price inflation and the debt of some government bodies as well as local councils could pose risks.
ÁSz pointed out risk affecting just a little more than 2% of tax revenue, but it did not see any risk for direct overspending. It did, however, note risk to the deficit target from uncapped expenditure items, which account for more than half of all expenditures.
Fiscal Council (KT) chairman Árpád Kovács said the budget bill reasonably assumed economic growth in the upper range of possibility, meaning an economic turnaround, but pointed out broad exposure to unexpected events in the global economy. This could be counterbalanced by the fiscal effects of the National Bank of Hungary’s Funding for Growth Scheme, if the funding for SME lending is fully allocated, he said. The scheme could keep GDP growth at 2-2.5% in the longer term, he added.
The government assumes 2.0% GDP growth in the budget bill, which is reasonable, Mr Kovacs said.
He said the deficit target was feasible, but “near the ceiling”, at 2.9% of GDP. Revenue targets from VAT and frequency sales are too optimistic and could raise the deficit, if the budget does not have sufficient reserves, he added.
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