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Hungary’s expected Ft 87.5 bln deficit for August

Financial Ministry is expecting Ft 87.5 billion deficit for August or about 0.4% of GDP, said undersecretary Miklós Tátrai.

Surplus of public budget (excluding local governments) was Ft 90.6 billion in July, somewhat lower than forecasted Ft 95.1 billion. Expected cashflow deficit by the end of September will reach Ft 1204.2 billion, 4.8% of GDP. Hungary is struggling to cut the European Union's widest budget deficit, expects a shortfall this month after rising tax revenue produced a surplus in July. Hungary is maintaining its projection of an annual deficit at 6.4% of GDP, after last year's gap of 9.2% of GDP.

The nine-month target is 4.8%. Prime Minister Ferenc Gyurcsány has cut public jobs, raised taxes and slashed subsidies to reduce the deficit from a record last year. The EU has said Hungary may be able to meet its budget goal this year for the first time since 2001. „The higher revenue of the central budget is primarily the result of a favorable turnout in excise duties, the personal income tax, value-added tax and registration tax,” Tátrai said at a press conference in Budapest.

The government on June 11 lowered its forecast for the annual deficit to 6.4% of GDP, by the EU's measure, reducing the original plan for a deficit of 6.8% of GDP a third time this year. Next year's target is a deficit of 4.5% of GDP. The forint traded at 260.44 per euro at 1:40 p.m. in Budapest, from 257.25 late yesterday. Hungary may spend the excess revenue that has resulted from measures to reduce tax evasion by lowering taxes from 2009, Tátrai said. The government will decide the exact changes in the H1 of next year, he added, declining to say which taxes may be cut.

Rising food prices, after a late frost earlier this year and extreme heat last month decimated crops, don't yet warrant a reduction of the value-added tax on agricultural products, Tátrai said. The government now sees food prices rising by 10% to 15% as a result, he added. „There isn't and there won't be a situation that would make this necessary,” Tátrai said.

„If there is a situation when the increase of food prices exceeds what now can be forecast with common sense, then it will be worthwhile to worry about some kind of compensation.” The government is also maintaining its forecast of 7% for this year's annual inflation rate, though that may be revised after August figures become available next month, he said. Hungary on August 14 said consumer prices in July were 8.4% higher than a year earlier. (Gazdasági Rádió, Magyar Hírlap, Bg)