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FinMin lowers nine-month deficit forecast

Hungary, the European Union member with the largest budget deficit compared with the size of the economy, lowered its nine-month deficit target and said it expected an August shortfall of Ft 167.1 billion, Ft 20,4 billion less for the first three quarters but Ft 2,6 billion more till the end of the year, said Tamás Katona, deputy finance minister.
Hungary lowered its nine-month cash-flow deficit target to Ft 1.56 trillion, or 6.7% of GDP, from Ft 1.58 trillion, according to a report distributed by the Finance Ministry in Budapest today. It was revised lower after Hungary posted a higher-than-expected budget surplus in July. The full-year target remains Ft 1.77 trillion. "Budget income is in line with expectations," Katona said at the Finance Ministry briefing. "Interest payments accounted for about Ft 100 billion of the August deficit." Prime Minister Ferenc Gyurcsány is struggling to reduce the shortfall, which is expected to surpass targets for a fifth consecutive year. He has pledged to raise taxes, boost energy prices and cut government jobs to trim the shortfall. The government revised its target for the annual cash-flow budget deficit to Ft 1.77 trillion from Ft 1.55 trillion in June. Finance Minister János Veres said July 25 the government will raise this year's targeted shortfall by EU standards to 8.6% of GDP from 8%, to account for full costs of highway construction.
The Finance ministry said, Hungary had a budget surplus of Ft 33 billion in July compared with a government forecast of Ft 7.8 billion, since state income from taxes was higher than expected. This way the cumulated deficit summed up to Ft 1,252 billion, which is the 70,9% of the target, and equals 5,4% of the GDP. The country's economy is expected to grow some 4% this year and its GDP growth target "is not in danger," Katona said. The GDP rate fell to 3.6% in the Q2 from 4.6% in the Q1, the central statistics office said Aug. 15. (Bloomberg,