FinMin forecasts July budget surplus at Ft 7.88 bln
Wednesday, July 19, 2006, 08:17
Hungary, struggling to control the European Union's largest budget deficit, expects a surplus of Ft 7.88 billion this month and reiterated its revised target.
The cash-flow deficit will probably reach Ft 1.58 trillion, or 6.8% of GDP by the end of September, according to a report distributed by the Finance Ministry during a press conference in Budapest on Tuesday. The ministry has marginally changed its full-year deficit forecast to Ft 1,767.1 billion from Ft 1,768.6 billion. Hungary's public sector deficit came to Ft 303.9 billion in June, while the ministry expected a gap of Ft 337.3 billion (cash-flow based data, excluding local governments).
The January-June gap totalled Ft 1,284.9 billion or 5.6% of gross domestic product. The ministry projected Ft 1,318.3 billion deficit for H1, which would have been 5.7% of GDP. The H1 gap corresponds to 72.6% of the fully-year estimate. Prime Minister Ferenc Gyurcsány is struggling to reduce the shortfall, the EU's largest compared with the size of the economy, which is expected to surpass targets for a fifth consecutive year. He said the new package is tough but effective. Gyurcsány has pledged to raise taxes, boost energy prices and cut government jobs to trim the shortfall.
The government June 20 revised its target for the annual cash-flow budget deficit to Ft 1.77 trillion from Ft 1.55 trillion. The targeted shortfall by EU standards is 8% of GSP, even after measures to cut it by Ft 350 billion this year. The June deficit was Ft 303.9 billion, compared with a government forecast of Ft 337 billion. The shortfall was smaller than expected as revenue was above target while the central government bureaucracy spent less than budgeted, said Tamás Katona, undersecretary at the Finance Ministry. Inflation is likely to accelerate to about 3.5% by the end of the year from 2.8% in June as a result of the deficit-cutting measures, Katona said. Hungary will post a Ft 7.8 billion public sector surplus in July, Finance Ministry secretary of state.
Extra-budgetary funds booked a surplus of Ft 8.6 billion. Katona also said that the ministry considered their 4.5% GDP growth projection for 2006 achievable, but added that the inflation estimate needed to be revised due to the government's fiscal adjustment package, which was announced on June 10. The previous 2% annual average inflation forecast was raised to 3.5%, he added. (Bloomberg, Portfolio.hu)