Gov't submits 2021 budget amendments

Government

Hungary's government on Tuesday submitted amendments to the 2021 budget act that would raise the accrual-based deficit target, calculated according to European Union rules, to 7.5% of GDP, according to a report by state news wire MTI.

"The focus of the bill is maintaining pandemic defense and the implementation of decisions that aim to jump-start the economy in the interest of returning [Hungary] as quickly as possible to its earlier growth path, outstanding in European comparison," the bill's authors said in the justification.

They noted that when the 2021 budget act was approved, in July 2020, GDP was expected to fall 3% in 2020 and grow 4.8% in 2021, but further waves of the pandemic caused Hungary's economy to contract 5% in 2020, and GDP is now expected to grow 4.3% in 2021.

Changes to the funding Hungary will get during the 2021-2027 European Union budget period, as decided by the heads of state and government of member states last December, also require changes to the 2021 budget act, they added.

The bill shows budget expenditures of HUF 25.052 trillion and revenue of nearly HUF 22.765 tln. The cash flow-based deficit target is set at HUF 2.288 tln.

The Fiscal Council, a body established to weigh in on budget matters, earlier said the HUF 2.288 tln target is "inconsistent" with the 7.5%-of-GDP ESA deficit target and recommended changing the cashflow-based target to HUF 3.99 tln.

The bill's authors acknowledged that targets in the bill do not add up to the 7.5%-of-GDP deficit target, but said the reason is that the amendments do not affect expenditure and revenue targets implemented in the scope of the government's power but only those that require the approval of lawmakers.

The bill targets a decline in year-end state debt, relative to GDP, to 79.9% in 2021 from 80.4% in 2020.

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