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MNB says off-budget items pose “considerable risk”

The National Bank of Hungary (MNB) said items outside of the general government “continue to pose considerable risk” to the deficit in its fresh quarterly Inflation Report.

In the report, the bank put the general government deficit, calculated with EU methodology, at 4.3%-4.5% of GDP in 2010, 3.9% in 2010 and 2.9% in 2012, but it noted that the projections did not take into consideration any risk from debt assumptions.

The MNB recalled that it pointed out risk of quasi-fiscal activities already in its Inflation Report published in November 2009 and said the positions of state-owned transportation companies as well as of the health care system continue to entail a “serious hazard” to the deficit path. Future intervention is likely to be necessary, but risk management does not have to be carried out in one year or to the total amount, it added.

The bank estimated that the renationalization of airline Malév would require government support equivalent to 0.1% of GDP in both 2011 and 2012. It estimated debts of state-owned railway company MÁV and the Budapest public transport company BKV reached 0.9% and 0.3% of GDP, respectively, at the end of 2009. The total debt of both companies is seen rising a further 0.2% of GDP in 2010, bringing their combined debt to 1.5% of GDP.

Hungary currently targets a general government deficit of 3.8% of GDP for 2010. But economy experts in the new government have said the deficit could reach 6.5%-7.5%. (MTI – Econews)