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Government outlines capacity of budget reserves

Banking

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The HUF 60 bln reserves in the National Protection Fund are sufficient to cover a 60 basis-point rise in yields or a tax revenue shortfall stemming from 0.4-0.5 percentage-point slower than projected growth, an explanation in the 2017 budget bill shows, Hungarian news agency MTI reported yesterday.

The budget bill is based on 3.1% GDP growth and a further drop in forint interest rates. 

The government explained the type and volume of risks it took into account when planning the budget reserves at the request of the Fiscal Council.

The government reshuffled the reserves compared to the budget draft also at the recommendation of the Fiscal Council, the bill said. It raised the National Protection Fund by HUF 10 billion to HUF 60 bln and cut the appropriation of the reserves set aside for “extraordinary government measures” – the general budget reserves – by HUF 10 bln to HUF 110 bln. The aim of this move was to reduce the risk of a deficit overshoot, the bill said.

A recent methodological stand taken by EU statistics office Eurostat on the accounting of the so-called growth tax credit for 2015, will improve the balance for 2017, which allowed the government to finance further investments and tasks next year while keeping the ESA deficit as planned at 2.4%, the bill explained.

The accounting of the tax by Eurostat raised the preliminary 2015 ESA deficit by 0.1 of a percentage point compared to the raise reported by Hungary to Brussels at the end of March to 2.0%.

The growth tax credit, first available in 2015, allows companies to pay the corporate tax due on the increment, if any, of their pre-tax profit in the next two tax years rather than in the given year.

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