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Plugging budget hole main gov’t concern, says Varga

The most important task ahead of the government this year is to “plug a hole” of HUF 80-100 billion (€290-366 million) in the budget due to economic growth underperforming the target, the state secretary of the Prime Minister’s office told a TV program on Sunday evening.

Mihály Varga told commercial news channel HírTV that economic growth this year was expected be 2% or lower. He said plugging the hole would not be a simple task, requiring 8 to 10 small reductions in the ranges of HUF 10-20 billion to help keep the budget deficit below 3%, but pension assets transferred to the state would not be used to serve this goal.

Varga said revenues from such areas as value-added tax had been lower than expected, adding that the new flat income tax introduced from this year had not lifted consumption by Hungarian households, many of which are plowing income into repaying skyrocketing mortgages denominated in foreign currency, or to make further savings.

The government will have to pay VAT refunds to enterprises after a July ruling of the European Court of Justice. Varga said initial estimates of this cost to the budget ranged between HUF 240-260 billion.

Concerning a possible reshuffle of government, the state secretary said minor changes were conceivable.