Hungary manages to keep deficit low in July

Overall, there is no major threat to Hungary's 2014 deficit target, set at 2.9% of GDP, thanks to several major revenues to the budget that are expected to be realised in the second half of the year. On the negative side, we would have expected the newly released detailed statement to explain why budget freezes totaling an (alleged) HUF 110 billion were necessary, something the report has failed to account for.

The Economy Ministry has noted that aggregate deficit in the first seven months of 2014 (HUF 851.4 billion) is almost exactly as much as the corresponding 2013 figure (HUF 851.2 billion).

This year, aggregate deficit from January to July arose as the combined result of a HUF 1,031.1 billion gap in the central government budget, partly offset by surpluses in the social security funds and dedicated government funds -- HUF 134.2 billion and HUF 45.5 billion, respectively.

As stated in the early August flash report, the Economy Ministry has once again stressed in the Thursday release that "an assessment of this year's deficit trends should highlight that additional revenues from renewed economic growth, higher employment, and online cash register connectivity have a major impact on the budget balance. These positive trends should manifest themselves more pronouncedly in the second half of the year compared with earlier years."

"Due to the typical, uneven, distribution pattern of revenues and expenditures that repeats itself over the course of each year, the accumulation of deficit is not evenly distributed over the year 2014 either; in the first half of the year, expenditures exceed revenues. The ESA deficit target remains set at 2.9% of GDP."

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