City: Hungary fiscal gap may undershoot even revised forecast

The government has revised its forecast for the 2008 budget deficit down 0.2 percentage point to 3.8% of GDP. Juliet Sampson, Central European economist at HSBC in London told Econews that the new forecast is “entirely within reach”. In addition, there is probably still room for the budget to come in below the revised figure. “We may not have as wide a margin of outperformance as we had in 2007, but nonetheless they have been conservative since mid-2006 in their estimates”, she said.

Asked about her deficit forecast for this year, she said she expects a 3.7% fiscal gap. Asked about the potential fiscal performance next year, she said, however, that she “wouldn’t be surprised but would be disappointed” to see a higher budget deficit as a percentage of GDP next year. “The progress is very likely to slow”, she added.

Michal Dybula, Central European economist at BNP Paribas, told Econews that “inflation is doing well in the way, that it is certainly boosting the nominal side of the fiscal equation”. On the other hand, “it needs to be fairly said”, that so far the government has kept a reasonable grip on the spending side. However, how next year’s budget will be drafted and executed by the government is certainly more important at this stage than the downward revision, he added. He said, however, that he saw no major fiscal overshoot occurring next year as this administration has proved reasonably committed to the fiscal tightening, and even if there was some overspending in the run-up to the elections it should be well contained. Dybula said he expects the deficit to rise to 4.5% next year, “not really dramatic given these huge numbers in the past years”. (MTI-Econews)