Changes to 2015 budget pose no risk to deficit target

Telco

This yearʼs deficit target can still be achieved in spite of planned changes to the budget, the National Economy Ministry said yesterday, Hungarian news agency MTI reported.

"Based on the positive macroeconomic and fiscal trends in the year to date, gross state debt as a percentage of GDP is still expected to fall at the end of 2015 compared to one year earlier, calculated with unchanged exchange rates. This means the rule on debt will be kept and the general government deficit target is achievable," the ministry said in a statement.

Hungaryʼs Constitution requires year-end state debt as a percentage of GDP to decline until a 50% cap is reached.

The government seeks to modify the 2015 budget spending figures to make funds available for "several goals important for the public interest", the ministry said. These include the acquisition of a stake in Erste Bank and the debt consolidation of the Budapest Transport Company (BKV), it added.

The government approved last week changes to the 2015 budget that would raise expenditures by HUF 61 bln and revenue by HUF 46 bln.

Deputy state secretary for the budget Richard Adorjan said on public television on Tuesday that more than HUF 56 bln in additional funding was necessary for Hungaryʼs role in Kurdistan and a museums project in Budapest as well as for the acquisition of the Erste stake and the takeover of more than HUF 50 bln of BKVʼs debt.

In an opinion issued on Tuesday, the Fiscal Council said the governmentʼs amendments to the budget would raise this yearʼs cashflow-based deficit by HUF 15 bln. Calculated according to European Union accounting standards, the deficit will widen by about HUF 50 bln, or the equivalent of 0.15% of GDP, which will make achieving the 2.4%-of-GDP ESA deficit target more difficult. But the target can still be met, based on data from the first quarter, if the macroeconomic trend remains stable for the rest of the year, if revenues meet expectations, and if the government continues to exercise tight control over spending, especially if the external environment takes a turn for the worse, the council said.

Achieving the target is also supported by a fiscal defense fund that contains HUF 30 bln, or the equivalent of 0.1% of GDP, the council said.

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