MNB Points to Fiscal Risk of Recapitalization in Report
Mandatory recapitalization of the National Bank of Hungary (MNB) following expected losses due to economic stimulus and measures to bring down inflation pose a risk to next year's budget equivalent to 0.4%-0.5% of GDP, the central bank said in a report published on Tuesday, according to a report by state news wire MTI.
MNB based the calculation in the Fiscal Report on its estimated losses and the government's legal mandate to cover any difference between the central bank's net assets and statutory share capital in equal payments over five years.
MNB acknowledged that the exact value of the fiscal risk could be "significantly influenced" by changes in the domestic economy as well as the global environment.
The central bank estimated that next year's cash flow-based budget deficit could exceed the HUF 2.515 trillion target by around HUF 400 billion on a HUF 600 bln shortfall in revenue, suggested by an undershoot in revenue from taxes on consumption and labor this year, and expenditures that are HUF 200bn under the target, as the result of savings on energy expenditures.
MNB put next year's accrual-based deficit, calculated according to EU accounting rules, at 2.9% of GDP, in line with the target in the government's budget bill.
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