Hungary's June central government deficit totaled HUF 162.3 billion, the Econom Ministry said on Monday. This is the lowest June deficit figure in any year since 2005. At the end of June, year-to-date cash-based deficit stood at 82% of the 2013 target.
June gap narrow
Compared with ealier years, Hungary's central government deficit was relatively low in June.
The HUF 162.3 billion gap was the aggregate result of HUF 186.4 billion budget deficit, HUF 9.4 billion surplus at dedicated government funds, and HUF 14.7 billion surplus in Social Security funds (healthcare and pension).
As regards a year-on-year comparison, the Economy Ministry flash report notes that "as a result of changes affecting various tax types (lowered targets for certain taxes, elimination or modification of others, introduction of new taxes) it is impossible to compare the two corresponding periods without adjustment for all of these distorting effects." "In addition, as a result of organizational changes, the public services formerly operated by local governments and taken over as of 1st May 2012 or 1st January 2013 have played a major role in 2013 state revenues and expenditures," the ministry added.
YTD deficit at 82% of 2013 target
The central government has accumulated HUF 721.7 budget deficit in the first six months of 2013, significantly more than the HUF 517 billion in the corresponding period of 2012. The distribution of deficit over the course of a year has apparently become even more disparate, with heavier spending in the first half of the year.
As regards year-to-date deficit, at 82% of the 2013 target the gap is not extremely wide compared with recent years when the gap was even wider at the end of June as a percentage of the full-year target.
The deficit trends witnessed to far this year would not necessitate government intervention, yet the four months since the appointment of Mihály Varga as Economy Minister have seen two fiscal consolidation packages, the second of which is scheduled to come into effect as of 1st August. This suggests the government may be deliberately tightening the belt in order to have some room for spending manoeuvre in the second half of the year.
The 12-month trailing deficit has shrunk to HUF 811 billion, less than the 2013 target of HUF 880 billion.
The background
Cumulative year-to-date revenues to the central government budget were nearly HUF 288 higher at the end of June compared with a year ago. The higher figure was due to certain tax revenues (personal income tax, vehicle registration tax, administration fees) exceeding the amount collected in 2012, new taxes, and higher revenues of public service providers and ministries' discretionary funds, according to the detailed report.
Central government budget expenditure in the six months to June grew HUF 610 billion year-on-year, the main reason for which is higher expenditure on public services and discretionary spending as a result of the central government taking over a large number of healthcare and educational institutions that had been previously operated by regional or local governments. In addition, individual and normative subsidies, housing subsidies, state guarantee liabilities, spending on state assets, and the miscellaneous other expenses also exceeded the amount spent between January and June 2012.
H1 2013 debt service totaled HUF 637 billion, HUF 55.6 billion less than a year earlier. At HUF 59.3 billion, interest income fell HUF 7.9 billion. Net debt service was HUF 577.7 billion, a HUF 47.7 billion improvement year-on-year.
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