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Hungary ESA deficit 6.6% of GDP in Q1 - KSH

Hungary had a preliminary general government surplus of HUF 2,202 billion in the first quarter including pension fund assets, which translates into a deficit of HUF 457.9 billion or 6.6% according to the European System of Accounts (ESA), which excludes pension assets, the Central Statistics Office (KSH) said on Tuesday.

The ESA is the system of national accounts and regional accounts used by members of the European Union.

The adjusted deficit rose from a year earlier despite a below-inflation 1.7% rise of expenditures as the income tax changes introduced this year resulted in an overall 2.8% drop in revenues.

The surplus resulted from booking as government sector revenue in the system of national accounts HUF 2,660 billion of the private pension fund assets transferred to the state on behalf of former members. The figure excludes the real yields and membership supplements, worth about HUF 260 billion, the KSH said.

Excluding the above revenue, Hungary’s ESA deficit in Q1 was HUF 137.5 billion or 1.8 percentage points higher than in Q1 2010.

Government sector revenue totaled HUF 5,475 billion including the assets transfer, up 89% from a year earlier.

Revenue totaled HUF 2,814.9 billion excluding the pension assets, dropping 2.8% from a year earlier. The main factor behind the drop was a sharp, 20.9% fall in revenue from income taxes, to HUF 410.4 billion, reflecting mainly this year's income tax changes and, to a lesser extent, a drop in corporate tax revenues.

Revenue from VAT also fell, by 5.5% from a year earlier, to HUF 550.7 billion. Production and import tax revenues rose 1.5% to HUF 1,058.6 billion.

Capital taxes jumped from just below HUF 3 billion in Q1 2010 to HUF 35.1 billion, reflecting the extraordinary banking levy. Part of the banking tax is booked among income or production taxes, as the tax varies within the financial sector, Anna Lehmann of KSH said.

Revenue from the "crisis taxes" levied on the telecom, energy and trade sectors was yet insignificant in the first quarter. These taxes are accounted as production tax revenue, she said.

Social security contributions rose the most, by 12.4% to HUF 891.6 billion, as the membership fees of private pension fund members have been rechanneled to the state pension system starting last November.

Expenditure rose a moderate HUF 1.7 billion to HUF 3,272.8 billion.

Fixed capital formation or investment expenditure rose by a sharp 8.7% from a low base to HUF 114 billion.

Interest expenses were practically unchanged from a year earlier, rising a mere 0.2% to HUF 293 billion in Q1. Current expenditure rose a moderate 1% to HUF 498.1 billion.

The public sector's wage bill fell a sharp 11.8% from a year earlier to HUF 679.6 billion. The drop reflects changes in above-wage benefits in the sector rather than a reduction in the number of employees.

Social benefits, excluding in-kind transfers, rose 1.9% in one year to HUF 1,076.7 billion.

Other expenditure rose the most, increasing by 22.1% to HUF 611.6 billion. Expenditure in the category varies significantly, including production support and co-financing to EU-supported funding among other items, Lehmann said.