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Gen govʼt deficit reaches 122% of full-year target for 2019

Hungaryʼs cash flow-based general government, excluding local councils, ran a HUF 1.219 trillion deficit at the end of December, the Finance Ministry confirmed in a second reading on Wednesday, state news wire MTI reports.

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The deficit reached 122.1% of the HUF 998.4 billion full-year target.

The central budget ran an approximately HUF 1.024 tln deficit, while separate state funds were HUF 39.6 bln in the black and the social insurance funds were HUF 234.8 bln in the red for the year.

Alone in the month of December, the general government ran a HUF 452.7 bln deficit.

The ministry noted that central budget pre-financing for European Union-funded projects continued to impact the balance: payouts for such projects reached about HUF 1.557 tln for the year, while transfers from Brussels came to around HUF 1.469 tln.

Continued wage growth, spurred by a six-year agreement between the government, employers, and unions pairing minimum wage rises with payroll tax cuts; higher employment; dynamic consumption growth; a crackdown on tax evasion; and government measures to shield Hungary from the impact of the global economic slowdown helped lift full-year GDP growth to around 5%, the ministry said.

As a result, VAT revenue rose by HUF 603.7 bln, revenue from personal income tax was up HUF 247.2 bln, payroll tax revenue climbed HUF 466 bln and excise tax revenue increased HUF 64.5 bln, it added.

Expenditures were affected by spending on investments undertaken in the framework of the Modern Cities Program and the Hungarian Village Program, road and railway upgrades, and incentives for business investments to improve competitiveness, the ministry said.

Expenditures were also lifted by a package of family support measures that included prenatal baby support loans and subsidies for vehicles for large families, by premiums for pensioners linked to economic growth and by wage rises in the public sector, it added.

The ministry said the general government deficit calculated according to the EUʼs accrual-based accounting rules could "turn out to be well under the EU criterion".

The government targets a 1.8%-of-GDP deficit for the year.

Retail security sales easily cover deficit

The ministry noted that net issues of retail government securities, denominated in forints, reached approximately HUF 1.561 tln last year, more than enough to cover the full deficit as well as to finance maturing FX debt.

On the other hand, the weaker forint increased Hungaryʼ state debt by HUF 146.5 bln, while a HUF 36.2 bln rise in the level of mark-to-market deposits also boosted the state debt level.

Net redemptions of FX debt reduced state debt by HUF 750 bln during the year, the ministry added.

Central budge debt stood at HUF 29.982 tln at the end of December. Retail government securities accounted for 30.57% of the total. FX securities and credit made up 17.25%.