Economy 20 January 2023, 8:45am

Hungary 'premature' 2023 budget nursed into full, healthy state

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In line with the Hungarian government's earlier promise, the Ministry of Finance presented the amended version of the 2023 budget to Parliament on Thursday afternoon. This is interesting because last year, in the final days of the year, the cabinet had already theoretically set in stone (for the second time) this year's main budget figures. But a quick glance at the newly released version of the law shows that the budget has changed again. It remains to be seen what MPs and committees will be able to do in the current parliamentary round, but it is a positive development that the government has responded relatively quickly to concerns and criticisms about fiscal transparency.

In the Official Gazette of 29 December, the government has already announced and, in principle, 'set in stone' an unprecedented amendment to the 2023 budget by decree (effectively eliminating the role of the legislature in one of the most important bills). We wrote about that version in detail in this article.

However, by the last days of last year, it had also become clear that the government would, in a strange twist, be bringing the 2023 draft budget to parliament. This took place on Thursday afternoon, when the ministry announced that "the budget for the protection overheads reduction is before Parliament".

So, after the first version of the 2023 budget, adopted in the summer of 2022, the government issued a decree at the end of last year to create the second version of this year's budget, and almost three weeks later, almost to the day, it prepared and published the third version of the 2023 budget. And first impressions show that this third version is also different from the others.

In its press release, the Finance Ministry highlights the usual political hooey (the focus is on protecting Hungarian families, jobs, the value of pensions, security, reduction of utility bills), and underlines that

the budget deficit will be significantly reduced compared to 2022, from 4.9% of GDP excluding the special gas purchases to 3.9% of GDP,
the debt-to-GDP ratio will be lowered to 69.7% from 73.5%, while the previous version targeted a 70.2% of GDP debt;
Hungary will avoid recession and GDP will grow by 1.5%; and
the cabinet will strive to lower inflation to a single-digit figure by the end of the year.

The ministry does not say why it set the debt target 0.5 percentage points lower compared to the figure given only three weeks ago. In other words, in the space of a few weeks, (at least) one major number of the budget document, which was theoretically set in stone for the second time at the end of the year, has already changed (the first time was in the summer of 2022, when the first version was adopted by Parliament),

The 2023 budget document, which was only 85 pages in its decree form, has now grown to 166 pages.

HOWEVER, IT IS A POSITIVE DEVELOPMENT THAT THE GOVERNMENT'S MOVE IS ALSO A RESPONSE TO CRITICISMS OF THE FLAWED FISCAL TRANSPARENCY.

At first glance, the document now tabled looks like a traditional parliamentary budget bill, with more detail on the main budget figures and the government's plans for this year. This should be seen as a positive development.