Ministry outlines HUF 1,400bn fiscal adjustment plan

Items in the 2012 budget bill add up to a HUF 1,400bn fiscal adjustment, or 4.9% of GDP, which ensures next year’s 2.5%-of-GDP general government deficit target will be met, the National Economy Ministry said in an English language document published on its website last Friday.

Almost 60% of the adjustment will be realized on the expenditure side, the ministry said in the document entitled "Measures to Attain the Sustainable Reduction of Public Debt".

About 83% of savings outlined in the Szell Kálmán Plan, a structural reform program unveiled in March, is included in the 2012 budget bill, the ministry said in the document. These add up to HUF 455bn, including HUF 158bn in employment and labor market measures.

The impact on the 2012 budget bill of measures in Hungary’s Convergence Program update also prepared in the spring come to HUF 305bn, according to the document. Included in this amount is HUF 241bn in spending eliminated from the Stability Reserve. The government decided to set aside the latter reserve from various 2011 budget appropriations as a buffer for unforeseen events early this year.

Additional measures in the 2012 budget bill will improve the fiscal balance by HUF 656bn, including HUF 488bn in higher revenue and HUF 168bn in reduced spending. The biggest item on the revenue side, of HUF 140bn, is expected to come from an increase in Hungary’s main VAT rate from 25% to 27%. The biggest item in savings, of HUF 110bn, will come from the "review and more efficient management of public tasks and duties" and the "reduction and abolishment of certain public tasks".

The document can be downloaded in pdf format here.