UPDATE - Parliament approves 2012 budget

Parliament approved the 2012 budget act with a vote of 255:48 in the early morning hours on Tuesday.

The budget shows revenues of HUF 14,340.9bn and expenditures of HUF 14,917.1bn, resulting in a deficit of HUF 576.2bn. The deficit target is 2.5% of GDP.

Last-minute changes to the budget bill raised both the expenditure and revenue lines by about HUF 16bn over the figures approved by Parliament on November 29, but the absolute deficit remained unchanged.

The government announced last week that the budget bill would be amended because lower growth and a weaker forint would put a HUF 320bn hole in it. Changes to fill the gap included freezing HUF 200bn of reserves, raising interest rate risk reserves by HUF 52bn, rechannelling HUF 48bn in employee contributions by private pension fund members and increasing the excise tax on tobacco products to generate an additional HUF 20bn in revenue.

The budget assumes an exchange rate of 299 forints to the euro and GDP growth of 0.5%, instead of a HUF/€rate of 268 and GDP growth of 1.5% in the earlier budget bill submitted to Parliament by the government.

The budget assumes average annual inflation at 4.2% in 2012.

It assumes payments of HUF 1,369bn in European Union funding and HUF 193bn in country co-payments in 2012. The combined HUF 1,562bn exceeds the comparable amount in 2011 by HUF 367bn.

The budget allocates HUF 132bn for the Start public work programme, up from HUF 64bn budgeted for such programmes this year.