Economy
Hungary sticks to deficit goal despite overshoot
By the end of November, Hungary’s budget gap has swollen to 113% of the full-year target, which implies that a massive surplus should be posted in the last month of the year to achieve the goal pledged to the International Monetary Fund (IMF) and the European Union in exchange for a USD 25.1 bn credit facility.
The ministry said spending was kept in check in November, and revenues from main taxes and contributions were in line with the estimates. VAT revenues exceeded the target, while personal income tax revenues came short of the goal.Uncertainty over revenues
Key tax revenues will be as expected, but there may be some discrepancies from the estimates with regard to the mix of these revenues, Tamás Katona, secretary of state at the Finance Ministry, told a press conference on Thursday.
“It cannot be excluded" that corporate tax revenues will fall short of the target, while consumption-related taxes could generate more than projected, he added.
Over the past few days or weeks, a number of economists warned that corporate tax revenues could come in HUF 50-100 bn under the plan due to the deep economic recession Hungary is currently in. The cabinet expects GDP to contract by 6.7% this year and by 0.6% in 2010.
Uncertainties will remain at least until 20 December, the deadline for corporate tax payments. Finance Minister Péter Oszkó has also acknowledged this recently.The expected jump in consumption-related taxes should stem from Christmas shopping, according to the ministry. However, retail sales statistics have been showing tightly closed purses from the households’ part and present-hungry buyers may not embark on such a fervid shopping spree that could change that in merit.
Targets unchanged
With regards to the government’s tight grip on expenditures, Katona noted that the ministries extremely close spending control is reflected in statistics for months now and so they do not pose a risk to the full-year deficit goal.
The ministry sticks to its deficit projection of HUF 992.4 billion (3.8% of GDP on a cash flow basis and 4.1% including local governments). The accrual based (ESA) gap target remains 3.9% of GDP.
In the first 11 months of the year, Hungary's budget gap totalled HUF 1,123.7 bn, corresponding to 4.3% of GDP. This should be lowered to 3.8% by a HUF 131.3 bn surplus for the following reasons.
1) Contrary to the practice of the previous years, a number of spending items will not be realised in December thanks to the government’s tight spending control.
2) While massive state budget balance reserves were tapped in December 2008, these cannot be used this year under a previous decision.
3) Spending on bonuses and other benefits will be much smaller than last year.
4) The ministries’ reserve obligations also exert control.
In view of the Q3 GDP print, the Finance Ministry continues to forecast 6.7% output fall for this year and 0.6% contraction for 2010. Katona noted the ministry is aware that an increasing number of analysts, both local and foreign, have more favourable growth estimates for 2010.
The ministry said spending was kept in check in November, and revenues from main taxes and contributions were in line with the estimates. VAT revenues exceeded the target, while personal income tax revenues came short of the goal.Uncertainty over revenues
Key tax revenues will be as expected, but there may be some discrepancies from the estimates with regard to the mix of these revenues, Tamás Katona, secretary of state at the Finance Ministry, told a press conference on Thursday.
“It cannot be excluded" that corporate tax revenues will fall short of the target, while consumption-related taxes could generate more than projected, he added.
Over the past few days or weeks, a number of economists warned that corporate tax revenues could come in HUF 50-100 bn under the plan due to the deep economic recession Hungary is currently in. The cabinet expects GDP to contract by 6.7% this year and by 0.6% in 2010.
Uncertainties will remain at least until 20 December, the deadline for corporate tax payments. Finance Minister Péter Oszkó has also acknowledged this recently.The expected jump in consumption-related taxes should stem from Christmas shopping, according to the ministry. However, retail sales statistics have been showing tightly closed purses from the households’ part and present-hungry buyers may not embark on such a fervid shopping spree that could change that in merit.
Targets unchanged
With regards to the government’s tight grip on expenditures, Katona noted that the ministries extremely close spending control is reflected in statistics for months now and so they do not pose a risk to the full-year deficit goal.
The ministry sticks to its deficit projection of HUF 992.4 billion (3.8% of GDP on a cash flow basis and 4.1% including local governments). The accrual based (ESA) gap target remains 3.9% of GDP.
In the first 11 months of the year, Hungary's budget gap totalled HUF 1,123.7 bn, corresponding to 4.3% of GDP. This should be lowered to 3.8% by a HUF 131.3 bn surplus for the following reasons.
1) Contrary to the practice of the previous years, a number of spending items will not be realised in December thanks to the government’s tight spending control.
2) While massive state budget balance reserves were tapped in December 2008, these cannot be used this year under a previous decision.
3) Spending on bonuses and other benefits will be much smaller than last year.
4) The ministries’ reserve obligations also exert control.
In view of the Q3 GDP print, the Finance Ministry continues to forecast 6.7% output fall for this year and 0.6% contraction for 2010. Katona noted the ministry is aware that an increasing number of analysts, both local and foreign, have more favourable growth estimates for 2010.
