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Hungary 2011 deficit, excluding one-offs, better than targeted

Hungary's general government deficit, excluding the effect of one-off measures, was 2.43% of GDP in 2011, lower than the 2.94% target and under the 3% threshold for the first time since 2004, National Economy Minister György Matolcsy told European Commission Vice President Olli Rehn in a letter on Tuesday. In a separate statement, the ministry explained the gap between its own one-off-items adjusted deficit figure and the higher one of the statistics office.

Including one-off measures, Hungary's general government ran a HUF 1,204.6 billion surplus – equivalent to 4.3% of GDP – in 2011, according to EU accounting methodology, he said.
    In addition to the continuation of tight fiscal policy, the better than planned deficit was due to the proportional flat-rate tax system, he added.
    Matolcsy told Rehn that the government is committed to keeping the 2012 budget deficit under the 3% threshold and would reduce the gap further in the coming years. He said that macroeconomic data show Hungary's economy is on the path of sustainable growth, adding that the government's commitment to implementing structural reforms outlined in the Széll Kálmán Plan and as well as measures already undertaken would ensure structural changes in the budget necessary for a sustained reduction of the fiscal deficit in terms of GDP.
    Announcing last year's 4.3% of GDP ESA95 surplus on Monday, the Central Statistics Office (KSH) said that – excluding last year's transfer of private pension fund assets to the state – the general government registered a deficit of 5.5% of GDP in 2011.
    The difference between the economy ministry's and the statistics office's stems from the different accounting of one-off items, the ministry explained in a statement on Tuesday.
    The ministry said it arrived at the 2.43% deficit ratio through deducting one-off items worth net HUF 1,888 billion or 6.7% of GDP from last year's ESA surplus of 4.3%-of-GDP.
    The one-off items listed by the ministry included: the part, worth HUF 2,228.8 billion or 7.9% of GDP, of last year's private pension assets transfer that was not was booked as budget revenue target in the 2011 central budget (revenue; the VAT refund, worth HUF 198.4 billion or 0.7% of GDP, made based on a September European Court decision (expenditure); capital raise of the state development bank MFB, worth HUF 40.6 billion or 0.1% of GDP (expenditure); the 2011 part of expenditure related to fx retail mortgage early repayments, worth HUF 52.2 billion or 0.2% of GDP; and takeover of debt from state railways MÁV, worth HUF 50 billion or 0.2% of GDP.
    The ministry did not include among the one-off items the part of the revenue from the pension assets transfer which had been booked as revenue in the budget (targeted at HUF 530 billion but coming in less, a preliminary HUF 460 billion). Missing are from the one-off list other budgeted items such as the HUF 170 billion proceeds of the sectoral or so-called crisis taxes levied for a temporary three years in 2010 or the extraordinary bank levy, worth HUF 186 billion last year. On the expenditure side, it included only part of the MFB capital raises as one-off spending.