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Hungary meets budget deficit target for last year

Hungary, which has the European Union's widest budget deficit, said it met last year's revised target and expects the January shortfall to be narrower than a year earlier.

Hungary said the final full-year 2006 deficit was Ft 2.04 trillion ($10.4 billion), matching the target and higher than a first estimate of Ft 2.03 trillion, the Finance Ministry said. The forecast for this month's gap is Ft 224.6 billion, compared with Ft 332.8 billion in December. Prime Minister Ferenc Gyurcsány raised taxes, regulated energy and drug prices and trimmed government jobs to shrink the deficit. Hungary's plan to adopt the euro, submitted to the European Commission on September 1, forecasts the deficit by EU standards to drop to 3.2% of GDP by 2009. „Measures in late summer and in the fall of last year are beginning to bear fruit and the first results are visible,” said State Secretary Miklós Tátrai at a briefing in Budapest today.

The cash-flow figures released today are a snapshot of the country's budget balance, measuring the immediate difference between revenue and expenditure in a given month. Based on those figures, the deficit was 8.7% of GDP last year. That is different than the measure monitored by the EU, which also includes other items, such as debt and guarantees in the books and will be determined later. The government expects the EU-standard figure to come in between 9% and 10% of GDP at the end of the year, compared with an earlier forecast of 10.1%. The ministry forecast the Q1 deficit at Ft 895 billion this year and the annual deficit at Ft 1.58 trillion. „The Q1 will be characterized by seasonality as we'll also be paying the extra month's bonus then,” Tátrai said, adding that the quarter's shortfall will amount 55.6% of the annual target. „The only quarter with a surplus will again be the fourth this year.”

Hungary on November 16 revised its annual cash-flow deficit forecast to reflect the government assuming over Ft 350 billion of debt from the country's highway management company and accounting for it in this year's book. Premier Gyurcsány aims to narrow the deficit this year, after Hungary missed government targets every time since 2001. He plans to cut the shortfall from below 10% of GDP in 2006 to 6.8% this year and to 3.2% in 2009 as part of preparations for euro adoption a few years later. (Bloomberg)