Hungary's government, working to reduce its budget deficit after running up the European Union's widest shortfall last year, today lowered its forecast for the first quarter as tax revenue exceeds targets.
The government expects the shortfall in the first three months to reach Ft 852.7 billion ($4.4 billion), Ft 42 billion less than planned, said Miklós Tátrai, a state secretary in the Finance Ministry. Revenue will be Ft 60 billion higher than planned, with spending Ft 18 billion above target. „The beneficial budget processes, which have an effect on reaching stability as soon as possible, are continuing,” Tátrai told a press conference in Budapest. „The January revenue and spending figures already showed the results of the decisions the government made last year.”
Prime Minister Ferenc Gyurcsány has raised taxes and cut subsidies to reduce the shortfall, after missing government targets every year since 2001. The government aims to lower the deficit to 3.2% of GDP by 2009 from about 9.6% last year. The forint fell to 252.37 per euro by 11:51 a.m. in Budapest from 252.23 late yesterday. The currency earlier today rose to 251.50, its strongest in a month.
Hungary expects the February shortfall to be Ft 251.2 billion, after a Ft 196.1 billion deficit last month. That was Ft 28.5 billion less than forecast. Income from the personal income tax and from social security contributions was Ft 8 billion more each than planned, Tátrai said. The government reiterated its annual deficit forecast of Ft 1.58 trillion. Hungary's accelerating inflation and slowing economic growth won't have a „substantial” effect on the shortfall, Tátrai said. The annual inflation rate rose to 7.7% in January, the highest in five years, while economic growth in the Q4 slowed to 3.2% from 3.8% in the third. (Bloomberg)