UPDATE - Govt sector Q3 deficit reaches 5.7% of GDP

Hungary’s government sector had a deficit of HUF 404bn in the third quarter of 2011, equivalent to 5.7% of GDP during the period, the Central Statistics Office (KSH) said on Tuesday.

Government sector revenue came to HUF 3,167bn in Q3. Expenditures reached HUF 3,571bn.

Revenue was up 6.3% from the same period a year earlier, as social security contributions rose 15.9% and taxes on revenue and imports brought in 10.1% more. At the same time, revenue from tax on income fell 19%.

Expenditures increased 12.6%. "Other expenditures" were up 80.1% because of "the accounting of VAT refund claims because of financially unsettled purchases", a state guarantee for a corporate bond issue by railway company MAV and a capital raise in national airline Malev, KSH said.

The accounting of the VAT refund claims could be related to refunds the state must make retroactively under a ruling by the European Court of Justice in July.

Payroll costs were unchanged but expenditures on gross fixed capital formation fell 14.5%.

In Q1-Q3, the general government sector had a surplus of HUF 1,537bn. Including the transfer of private pension fund assets to the state, revenue came to HUF 11,631bn and expenditures reached HUF 10,095bn. The pension fund transfers, minus payments of real yields and additional membership fees, revenue of HUF 2,677.7bn and other related revenue of HUF 39.0bn were accounted as revenue in the general government sector.

Excluding the transfer of the private pension fund assets, the general government sector ran a deficit of HUF 1,180.1bn in Q1-Q3, equivalent to 5.6c of GDP. The deficit was the balance of revenue of HUF 8,914.7bn and expenditures of HUF 10,094.8bn.

Revenue in Q1-Q3 was up 1.5% from the same period a year earlier as social contributions were up 15.5% but revenue from taxes on income dropped 20.5%. Social contributions were lifted by the transfer of the private pension fund assets, which took place in November, as well as the rise of the pension contribution rate by half a percentage point, KSH said. Revenue from both personal income tax and corporate profit tax fell because of tax changes, it added.

Expenditures rose 3.8% during the period. "Other expenditures" were up 24.4% because of the accounting of the extraordinary expenses in Q3, KSH said. Interest expenditures were up 3.4%. Spending on gross fixed capital formation was down 9.5% and payroll costs slipped 3.8%.