The National Economy Ministry announced on Monday afternoon that Hungary had a general government deficit, excluding local councils, of HUF 559.7 billion in January-February, 81.4% of the full-year target.
Zoltán Árokszállási of Erste Bank Hungary said that one-off revenue should significantly improve general government’s position for the rest of the year, but the government must still rigorously carry through with the structural measures stipulated in the Széll Kálmán Plan.
Árokszállási said that a major interest payment accounted for a large part of February’s big general government deficit, but even if cleared of one-off effects, the deficit pointed to serious potential problems ahead. He noted significant budgetary risks stemming from the labor market fund and drug subsidies.
The figures show no room to loosen up the measures planned in the Széll Kálmán Plan, and the HUF 900 billion adjustment must be implemented as targeted, Árokszállási said
Dániel Bebesy of Budapest Fund Management characterized February general government deficit figures as frightening. He added, however, that the HUF 530 billion in one-off budget revenue from the transfer of private-pension funds make it likely that government will meet whole-year deficit target.
Dániel Németh of ING Bank said that February general government deficit data reveals fundamental structural problems in the area of the general government.
High interest payments and typically low beginning-of-the-year VAT and personal income-tax revenue exercised a negative impact on the February general government, but the tax changes – the introduction of a flat 16% tax rate – lowered revenue from personal income tax further, showing the need for adjustment, Németh said.
The targeted one-off revenue of some HUF 1,000 billion forints will definitely be needed to meet the whole-year deficit target, Németh said. The higher pace of growth in 2011 and 2012 could help to fill the gap, but the structural reform measures must be implemented in order for the government to meet its targets for 2013, the ING Bank macro-economic analyst said.
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