The government will be able to achieve the 2.5% deficit target in 2012 with smaller GDP growth than the targeted 1.5% through the budget reserves, National Economy Ministry Deputy State Secretary Roland Nátrán told MTI on Wednesday.
The European Commission last week forecast 0.5% GDP growth for Hungary next year.
Nátrán noted that the government will still have the opportunity to officially modify its forecast for next year’s GDP growth in the next convergence program to be submitted to Brussels in December, but the deficit target of under 3% is still achievable through budget reserves.
At the end of September, the 1.5% GDP growth forecast for 2012 serving as the basis for the budget draft could still be regarded as conservative, though the ministry had already prepared for any possible negative risks at the time, Nátrán said.
In order to manage the risks, the government built in reserves of HUF 300bn, equaling 1% of GDP, into the 2012 budget bill, which will ensure achievement of the deficit target of under 3% in the event of lower-than-expected growth, the deputy state secretary said.
"We carried out a sensitivity test of the budget, which showed that the 2.5% deficit target can be met even if the Hungarian economy is hit by a major external shock," he said.
Nátrán said the European Commission’s forecast predicting a budget surplus for this year and a deficit of under 3% of GDP next year could result in a turnaround concerning the excessive- deficit procedure against Hungary.
EU Commissioner for Economic and Monetary Policy Olli Rehn noted in Brussels last Thursday that he cannot see a possibility at the moment for the Commission to propose a lifting of the excessive- deficit procedure started against Hungary in 2004. In spite of this year’s surplus and next year’s under-3% deficit, he said, the Commission cannot see the sustainability of the low deficit in the long term.
In response to that, Nátrán said the EC projects Hungary’s deficit to be over 3% of GDP in 2013 "in a prognosis the details of which we do not know, though we do know it is questionable from a methodological point of view."
In fact, the excessive-deficit procedure against Hungary should be cancelled in the spring of 2012 according to the EU rules as the regulation says that if Eurostat approves that a budget year - in this case 2011 - for which a surplus is forecast is closed with a sub-3% of GDP deficit, which will certainly happen in the spring of 2012, and the European Commission projects a deficit smaller than 3% for the following year, that is for 2012, resulting from long-term and sustainable processes, the EDP must be cancelled, Mr Nátrán explained.
At the same time, Nátrán acknowledged that the measures outlined for 2013 in the Széll Kálmán Plan to keep the deficit below 3% of GDP will first need to gain approval by the EU Commission. There are ongoing specialist negotiations with the EC on this, he added.