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MNB puts 2016 deficit over target in budget bill assessment

MNB

Hungaryʼs general government deficit, according to European Union accounting rules, could reach 2.2% of GDP next year, over the 2.0% target, the National Bank of Hungary (MNB) said in an assessment of the governmentʼs budget bill released today.

The MNB said primary fiscal revenue could fall short of the target by the equivalent of 0.7% of GDP, raising the deficit. The main reason for the discrepancy is some HUF 115 bln targeted in the bill from "other revenue from the sale and utilisation" of state-owned assets, the central bank added.

The MNB calculated the 2.2% deficit assuming the full cancellation of reserves worth the equivalent of 0.3% of GDP in the National Protection Fund.

In an opinion on the budget bill published earlier, the State Audit Office (ASZ) also said that the revenue targeted from the sale and utilisation of state-owned assets presented risk.

The MNB noted in its assessment that HUF 169 bln in revenue from similar sources had been targeted in the 2015 budget, but these sources had not yet been detailed.

Outlining the other main risks in the budget bill, the MNB said the carry-over of debt consolidation in the healthcare sector from this year to next could have a negative impact on the deficit of 0.1-0.2% of GDP. It added that achieving the governmentʼs target for utilisation of European Union funding could also worsen the fiscal position, because of a bigger co-funding requirement. The MNB said it expected a higher concentration of call-downs toward the end of the 2014-2020 funding cycle, while utilisation, and co-funding, remain under the target in 2016.

The MNB said year-end state debt as a percentage of GDP would fall by about one percentage point next year, calculating with the HUF/€304 exchange rate in the budget bill, but it added that the debt could drop from 75.4% to 73.4%, calculating with a rate of HUF 315 to the euro.

The MNB acknowledged in the opinion a bill the government had submitted to Parliament that would modify a rule on the nominal increase of state debt to ensure it is not violated next year.

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