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Fiscal Council says 2022 deficit reduction 'insufficient'

Government

The Fiscal Council, a body established to issue opinions on the government's budget drafts, has said a targeted reduction in the general government deficit from 7.5% of GDP in 2021 to 5.9% in 2022 is "insufficient", according to a report by state news wire MTI.

In an opinion issued late Tuesday on a draft of the government's 2022 budget bill, the Council said it "recommends that - in so far as growth or pandemic risks do not materialize - the 2022 general government deficit target in the draft should be closer to the 3% of GDP benchmark".

"The speedy economic recovery provides sufficient grounds for a more marked reduction in the 2022 deficit that would be an assurance of the re-establishment of balance and sustainable convergence," the Council added.

The opinion was unanimously backed by the Council's three members: chairman Árpád Kovács, National Bank of Hungary (MNB) governor György Matolcsy and State Audit Office (ÁSZ) head László Domokos.

The council acknowledged that the expenditures in the 2022 budget draft indicate that economic recovery is the "number-one priority" and said measures to jump-start the economy involve structural changes that could support economic growth in the long term.

"At the same time, in the case of a rapid increase of household consumption and dynamic growth of private sector investment activity, stimulus measures could result in economic overheating, increase inflationary pressure, and put the external balance at risk," it said.

The council added that it would be "appropriate" to make some budget allocations conditional and "only spend them if they are really necessary to stimulate the economy".

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