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Budget bill prepares Hungary for effective response to the unexpected

The government's 2013 budget bill prepares Hungary to react well to events arising from the uncertain global environment, according to the opinion of the State Audit Office (ÁSz) presented on Friday.

ÁSz chairman László Domokos, who presented the opinion at a press conference, noted that the government submitted the budget bill on June 15, well before the September 30 deadline. He added that ASZ had adjusted the issue of its opinion on the bill to the date and had also used a new methodology to analyze the targets for 2013.

The growing uncertainty of the external environment makes handholds even more important, he said.

In the opinion, published on the website of Parliament, ÁSz said there is risk on the revenue side of the budget and noted a lack of underpinning in the planning because of the short deadline for consultations.

This year's worse than expected macroeconomic conditions present serious risk for achieving fiscal targets in 2013, ÁSz said. The fact that the allocation for the National Protection Fund, a fiscal buffer, is lower next year than this year, and contains no interest rate risk reserves also presents risk, it added.

ÁSz calculated that reserves for macroeconomic risks in the 2013 budget bill were HUF 168 billion lower than those in the 2012 budget.

ÁSz said the 2.2% of GDP general government deficit target in 2013 budget bill is achievable in light of projected 1.6% GDP growth.

ÁSz monitoring chief Margit Horváth said central reserves must be supplemented with budget chapter reserves if there is to be sufficient coverage for unplanned, but necessary expenditures.

ÁSz's assessment of the bill covered 88% of the revenue side and 82% of expenditures.

ÁSz said 58% of the revenue target was well founded, 12% was partially based and 30% was underpinned by nothing and estimated to be unachievable.

Horváth put the financial transaction duty, the and the electronic road tool among uncertain revenue generators.

ÁSz said revenue and expenditures of the Pension and Health Fund were well established, but noted some risk related to the pension fund if inflation deviates from the projection.

Domokos said local councils also present risks related to a transfer of some of their tasks to the central government and the removal of some of the sources of their funding.

He said yields could fall if Hungary reaches an agreement on precautionary financial assistance from the International Monetary Fund and the European Union. The agreement would mean a kind of implicit reserves, he added.