The surprising thing about the general government chapter of Hungary’s new Convergence Programme is that there is absolutely no surprising figure in it. The deficit trajectory remains unchanged, but the balance will be practically zero percent by 2020. The public debt trajectory has risen as a result of the reclassification of Eximbank inside the general government sector, but the cabinet still expects to reach the 60% of GDP ratio the European Commission requires by the end of the current governing cycle.
We have already presented in detail what new estimates the Hungarian government has made in its updated Convergence Programme for the following four years. If we take a look at the 2017 programme, the cabinet’s optimism regarding GDP growth is undeniable.
The Economy Ministry, however, has made no change to its budget deficit estimates. The only new and absolutely not negligible piece of information is that it now made a forecast for 2022, as well.
The estimates show that Hungary’s budget gap will be practically gone by then, as the ministry forecasts the shortfall at 0.5% of GDP for 2022.
The Convergence Programme also sets as an objective that a budget bill aiming for a balanced (no-deficit) budget should be adopted for 2020. This chimes together with (now Finance Minister) Mihály Varga’s earlier remarks.
All the above foreshadows tight fiscal management for the following years. The programme also reveals, though, that the cabinet plans for this horizon the tax reduction fund and the development fund that could be considered as a kind of embodiment of the fiscal manoeuvring room. It is unclear how large the cabinet projects this elbowroom to be in the coming years.
What could work against the tight fiscal conduct is an ambiguous hint in the Convergence Programme on a wage hike programme in the public sector. As regards public finance processes between 2019 and 2022, the document says that on top of the career models started for teachers, law enforcement staff and more, and adding to the significant wage hike in the health care sector, the estimated budget course also takes into consideration a wage hike starting 2019 for public officials whose wage has not been raised by then.
Two months ago, Varga set another government objective of lowering the country’s debt-to-GDP ratio to under 60% by 2022. The Convergence Programme’s related figure is no different. According to the updated data, the path shifted one notch higher due to the compulsory re-classification of Eximbank inside the general government sector, but debt could still be reduced to 59.7% of GDP by 2022.
Economy Minister Mihály Varga arrives to the closed inaugural meeting of the Fidesz caucus to the Office Building of Members of Parliament on 3 May 2018. Photo and front page photo by MTI Fotó/Zoltán Máthé
Charting is displayed using TradingView's technology, a platform, where you can build advanced charts,
spot upcoming trends in the stock screener, and find inspiration in multiple trading ideas
