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Hungaryʼs 2019 budget submitted to Parliament

The four main goals of the budget are ensuring the security of the country, maintaining strong economic growth, supporting families, and continuing to work to achieve full employment. A disciplined fiscal policy will be continued and reserves will be raised by 50%, the government says.

The budget bill posted on the website of Parliament shows total revenues of HUF 19.580 trillion and total expenditures of HUF 20.578 tln. Revenues are planned 4% over those in the 2018 budget, while expenditures are 2% higher, national news agency MTI reported.

The deficit is targeted at HUF 998.4 billion, 27% lower than the gap targeted for 2018. The deficit target as a percentage of GDP is 1.8%, also well under the 2.4% target for 2018.

The budget targets total reserves of HUF 361.5 bln, about 39% more than in the 2018 budget. The reserves include HUF 165 bln for "extraordinary government measures" and HUF 136.5 bln in targeted reserves, both up by about 50% from 2018.

Reserves in the Country Protection Fund are HUF 60 bln in the 2019 budget bill, level with the amount in the 2018 budget. Targeted reserves for next year include HUF 78.4 bln for pay rises in the public sector and HUF 40 bln for the development of public services.

Higher VAT, lower state debt

The budget bill targets corporate tax revenue of HUF 399.5 bln, 8% over the target for 2018. Revenue from the Simplified Entrepreneurial Tax (EVA) is set to fall by 35% to HUF 45.4 bln, while revenue from the Itemized Tax for Small Businesses (KATA) climbs 20% to HUF 135.7 bln.

The target for revenue from the bank levy is HUF 52.9 bln, up 5% from the 2018 target. Revenue from the financial transactions duty is seen climbing 11% to HUF 228.1 bln.

Revenue from VAT is targeted at HUF 4.285 tln, 12% over the 2018 target. Revenue from excise tax is expected to edge up 3% to HUF 1.136 tln.

The bill targets revenue from personal income tax of HUF 2.361 tln, 13% more than the target in the 2018 budget. Revenue from household fees is seen edging up 2% to HUF 192.4 bln. The bill puts revenue from the toll on commercial vehicles at HUF 197.8 bln, up 11% from the 2018 target.

The bill projects state debt will reach 70.3% of GDP at the end of 2019, down from an expected 72.9% at the end of this year. In nominal terms, the bill puts state debt at HUF 31.430 tln at yearʼs end, up from an expected HUF 28.358 tln at the end of 2018.

The bill assumes a HUF/EUR exchange rate of 311.3 and a HUF/USD rate of 264.8 for the 2019 calculations. It puts Hungaryʼs net debt servicing costs at HUF 984.2 bln, up 3% from the target for 2018.

More allocated for health and education

Minister of Finance Mihály Varga said all of the governmentʼs portfolios would operate next year with budgets at least as big as those this year. The spending allocation for healthcare will grow by HUF 101 bln, while there will be HUF 15 bln more allocated for education, HUF 68 billion more for culture, and HUF 156 bln more for public security, he added.

Expenditures of Vargaʼs own ministry would more than double under the 2019 budget bill to HUF 793.9 bln because fiscal reserves would be moved to the ministryʼs chapter from the chapter of the Prime Ministerʼs Office.

Expenditures of the Ministry for Innovation and Technology are set at HUF 1.410 tln in the bill, 2% over the expenditures of the former Ministry of National Development in the 2018 budget. Varga said ongoing state investment programs would be continued next year and could contribute to a total of HUF 4 tln in developments.

The budget bill allocates HUF 2.036 tln for investments and developments. The individual allocations, which do not include the additional cost of administering the investment programs, come to HUF 222.9 bln for the home purchase subsidy scheme for families (CSOK), and HUF 313.2 bln for the Modern Cities Program.

The upgrade of the Paks Nuclear Power Plant will be allocated HUF 106.1 bln, with a further HUF 88.7 bln for the National Olympic Center, and HUF 46 bln to be used in the framework of programs that support economic developments in areas outside of the countryʼs borders with large ethnic Hungarian populations.

Some HUF 49.8 bln is allocated for general investment incentives, HUF 25.6 bln for a rehabilitation project in Budapestʼs City Park, and HUF 15 bln for investments by big companies ineligible for European Union funding. Cycling infrastructure investments are allocated HUF 10.6 bln in the bill.

The final vote on the budget will likely be taken on July 20.