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Advance payments on EU funding lift general govʼt deficit

Hungaryʼs cash flow-based general government, excluding local councils, ran a HUF 1,973.9 billion deficit at the end of December, the Ministry for National Economy said in a preliminary release of data on Monday. The deficit thus reached 169.2% of the HUF 1,166.4 bln full-year target, state news wire MTI noted.

The cash flow-based central budget deficit reached HUF 1,904.2 bln at yearʼs end and the social security funds were HUF 142.2 bln in the red, the ministryʼs statement shows. Separate state funds finished the year with a HUF 72.5 bln surplus.

In December alone, the general government ran a HUF 334.9 bln deficit.

Speaking at a press conference on Monday, the ministryʼs State Secretary for Budgetary Affairs Péter Benő Banai said the gap was widened by advance payments on European Union funding. While total expenditures on EU programs totaled over HUF 2,555 bln last year, transfers from Brussels reached just HUF 1,015 bln, he noted.

Home purchase subsidies for families with children rose HUF 35.5 bln over the previous year, while the introduction of career-path models in more segments of the public sector, combined with investment programs and the hosting of the FINA World Aquatics Championships, lifted expenditures by HUF 1,074 bln, Banai said.

On the other hand, net interest expenditures were HUF 70 bln lower, he added.

Calculated according to the European Unionʼs accrual-based accounting standards, Hungaryʼs general government deficit may have been around 2% of GDP last year, below the 2.4% target, Banai stressed. State debt as a percentage of GDP fell to 72.4% at the end of last year, from 73.9% at the end of 2016, he added.

If the European Union requires Hungary to include Magyar Eximbank within the general government (Eurostat, the EUʼs statistical office, has claimed that the institution should be included within the state budget), the ratio would still decline during the period, from 76% to 74.5%, the state secretary asserted. Hungaryʼs Fundamental Law (constitution) requires year-end state debt relative to GDP to fall every year until it reaches 50%.

Banai noted that lawmakers will vote on the 2019 budget in the autumn session, rather than the spring one, because of parliamentary elections ahead in April.