Gov’t cuts 2016 fiscal deficit target to 1.7% of GDP

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The government has decided to cut Hungaryʼs deficit target, calculated according to EU accounting rules, to 1.7% of GDP from 2% in light of better than projected performance so far this year, the Ministry for National Economy announced in its nine-month budget report today, Hungarian news agency MTI reported.

The nine-month cash flow-based general government deficit, excluding local councils, reached just HUF 2.4 bln in the first nine months of 2016, the ministry said in a first reading.  The deficit compares to a HUF 761.6 bln full-year target.

The nine-month deficit was the lowest in one and a half decades, and compares to a HUF 954.6 bln deficit one year earlier.

In September alone, the general government ran a HUF 271.6 bln surplus, compared to a HUF 39.7 bln deficit a year earlier.

Explaining the big shift, the ministry said that this year the European Union transferred big payouts to the central budget it granted to successful applicants in 2015 before the end of disbursement of funding for the 2007-2013 EU budgetary period. In addition, the budgetʼs position has been extraordinarily stable due to higher revenues and lower expenditures this year, it added.

The central budget ran a HUF 95.5 bln deficit in the first nine months of 2016, while the social insurance funds and separate state funds had surpluses of HUF 21.3 bln and HUF 71.8 bln, respectively.

The ministry said that the stable budget position was one of the main reasons for Hungaryʼs recent upgrade back to the investment grade category by international ratings agencies Fitch Ratings and Standard & Poorʼs.

The government has cut the deficit goal in the light of the favorable budget and good macroeconomic performance, noting that it already forecast the 2016 ESA-compliant deficit at 1.7% of GDP in its EDP report sent to the European Commission at the end of September.

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