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Fiscal Council clears 2018 budget bill

Analysis

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The Fiscal Council in a document released late Thursday said it "has no fundamental objections concerning the enforceability and the credibility of the 2018 budget bill that would warrant it signalling its disagreement" and that the budget bill is "properly designed", Hungarian news agency MTI reported.

The council noted that the budget bill is based on high economic growth, as according to it GDP could expand by 4.3% next year, and it also noted expectations for dynamic gross wage growth and an expansion in EU development funding.

In its opinion, the council said it is realistic to expect that domestic consumption will lead to a dynamic expansion in imports. Household consumption could grow by 4.6%.

It warned that lower than expected export figures could pose a downside risk to economic growth, but the main factor should still be the change in personal incomes and domestic consumption, as these carry a bigger weight.

The proposed budgetary spending and income figures are mostly in line with the governmental macroeconomic forecast for 2018. For the budget to realise the tax income it predicts, the council believes it is necessary to further whiten the economy and improve the efficiency of taxation.

The council said that demand for the governmentʼs home purchase subsidy for families with children is likely to be higher than expected and the additional funding for 2018 compared to 2017 might not be enough to cover the increase in demand.

Gross fixed capital formation could grow by 12.9% leading to a 20% expansion in investment. Employment could rise 1.8% and productivity 2.4%.

ESA general government deficit is expected to be around 2.4% of GDP with central government deficit near 3.2% and the surplus of municipal councils standing at around 0.5% and governmental sector surplus outside of the central government reaching 0.2% of GDP.

The council notes that state debt in nominal terms could grow, but the pace of expansion will be below the nominal growth rate of GDP therefore the debt to GDP ratio could fall as demanded by law. 

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