Economy 17 February 2020, 11:40am

Hungary debt down 4pp in 2019

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General government consolidated gross debt at nominal value was 66.4% of GDP at the end of 2019, the National Bank of Hungary's (MNB) financial accounts released on Monday show. Debt fell nearly 4 percentage points last year, primarily due to fast economic growth but also because of relatively disciplined fiscal policy. However, the government continued its pattern of spending the budget reserves built up throughout the year in the final months, so the last quarter again brought massive overspending.

Government debt has been decreasing since 2011, but it has picked up pace since 2017. This is because as economic growth and inflation accelerate, nominal GDP, which is the denominator of the debt ratio, is growing dynamically, so the overall figure keeps decreasing even with a relatively stable budget deficit.

According to the preliminary financial accounts, general government net lending was equal to -2.1% of Hungary’s GDP in 2019. This roughly corresponds to the accrual-based budget deficit, which means that the government more or less met its targets. (The official deficit target was 1.8%, but no final data is available as yet.) In 2019, the government continued its practice of spending the extra revenue brought in by faster growth and a reduced grey economy during the year in the last quarter. In Q4, general government net lending was -6.2% of GDP, or -3% with seasonal adjustments.

The net lending of households was equivalent to 5% of GDP in 2019, down from 6% a year earlier.