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Gov't Raises 2023 Deficit Target to 5.2% of GDP

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The government has modified this year's general government deficit target to 5.2% of GDP "in view of significantly increased expenditures", the Finance Ministry said on Tuesday, according to a report by state news wire MTI.

The deficit target was raised from 3.9% of GDP.

The ministry noted that the new target is still a one-percentage-point improvement over last year's 6.2%-of-GDP deficit.

The ministry pointed to the impact of the protracted war in Ukraine and Brussels' sanctions policies on the unfavorable state of the global economy and the energy crisis but said the budget would ensure that the value of pensions was preserved and family subsidies, as well as regulated utility prices for households, were maintained, even amid the extraordinary expenditures. 

The international situation presents an "extraordinary burden" for the Hungarian budget, the ministry said, adding that, in addition to increased spending on the regulated utility prices scheme, the country's defense expenditures would reach 2% of GDP in 2023.

The ministry said that Hungary had asked the European Commission for years to reimburse some HUF 650 billion in spending on protecting the country's border, which is also the European Union frontier. If those expenditures were reimbursed, it would shave close to one percentage point off the deficit, it added.

"Additionally, Hungary's room for fiscal maneuver would expand further if the European Commission would transfer the EU support that is legally due the country," the ministry said. 

The ministry said Hungary's outlook was favorable thanks to "stable economic fundamentals" and noted high employment, strong exports, falling inflation, an improvement in the current account balance, and a healthy investment rate. The country could return to the growth path by year-end, it added.

"The government will continue to improve balance indicators and remain on the path of reducing the deficit and state debt level from year to year," the ministry said.

"Hungary's state debt level has persistently been about 10 percentage points under the European Union average, and the government's goal is to accelerate further that tendency," it added. 

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