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Gov’t financing requirement is the lowest in almost seven years

  Hungary’s net general government financing requirement -- a measure close to the EU-conform ESA95 fiscal deficit -- was 3.5% of GDP (Ft 927 billion in nominal terms) in the four quarters ending June 30, 2008, the National Bank of Hungary (MNB) reported on Wednesday.


The figure is down from a preliminary Ft 980 billion, or 3.7% of GDP, and is the lowest in almost seven years. Hungary’s gross consolidated state debt, calculated at nominal value using EU (Maastricht) methodology, was Ft 17,085 billion at the end of June 2008, or 64.7% of the GDP of the four quarters ending Q2, practically unchanged from the preliminary figures. The figure was slightly down from 3.6% of GDP for the four quarters ending Q1 and a downward revised 5.0% in 2007.

The seasonally-adjusted net general government financing requirement was 2.5% of GDP in Q2, down from a preliminary 3.0% ratio the bank reported on August 18, and the same as the also downward-revised Q1 ratio, central bank figures show. The net government financing requirement as a percentage of GDP remained at its lowest level since a 1.9% figure posted in the last quarter of 2000.

According to unadjusted figures, the net general government financing requirement in Q2 was Ft 187 billion or 2.7% of GDP. The unadjusted ratio was up from 0.9% in Q1 2008.


Figures released by the Central Statistical Office (KSH) earlier in the morning show a Q2 ESA95 general government deficit of 140.3 billion, at 2.1% of GDP in the quarter. In nominal terms, the deficit rose Ft 25.3 billion compared to Q2 2007.

The deficit in the H1 of 2008 came to Ft 300.2 billion, or 2.2% of GDP. The H1 deficit fell by Ft 256.3 billion in nominal terms and was 2.2 percentage points down from a year earlier. The drop was mainly due to a rapid rise in revenue, including revenue from income taxes, KSH noted.

General government revenue rose 9.2% yr/yr (year-on-year) both in Q2 and in the first half of the year, while expenditure grew a slower 4.2% in a first half, but rose a sharp 10.5% yr/yr in the second quarter.

Revenue from income taxes rose 13.2% yr/yr in Q2 and was up 13.0% yr/yr in H1. Revenue from production and import taxes rose a below-average 8.6% yr/yr in Q2, though within this, revenue from VAT rose 10.4%. Social security contributions rose 6.6% yr/yr in Q2, also under the average. Second-quarter expenditures grew 10.5% yr/yr, because of a 11.2% rise in social subsidies, excluding in-kind subsidies, and an 11.1% increase in government spending on wages.

First-half public sector spending was up 4.2%, including a 9.9% increase in social subsidies, a 6.3% rise in spending on wages, and a 5.5% increase in intermediate consumption. In contrast, gross fixed capital formation, or investment spending, fell a sharp 15.4% yr/yr in Q2 and was down 31.3% yr/yr in H1.

KSH revised the Q1 deficit down from a first reading of 2.6% of GDP as it revised the deficit figure down Ft 14.5 billion to Ft 159.9 billion, and lowered the seasonally-adjusted quarterly GDP by Ft 43 billion to Ft 6,637 billion.

KSH also revised Hungary’s 2007 full-year ESA’95 general government deficit from 5.5% of GDP to 5.0% of GDP. Maastricht-conform government debt stood at Ft 16,729.3 billion at the end of 2007 or at 66% of GDP, KSH said, citing figures from the National Bank of Hungary.

KSH will publish final figures and a detailed report on October 22. (MTI-Econews)