Economy 22 August 2024, 9:15am

Hungary debt-to-GDP ratio rises to two-year high amid high deficit and unexpected recession

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Hungary's net financing needs were still significant at 5.5% of GDP in the four quarters to Q2 2024, and the unexpected recession between April and June led to the government debt-to-GDP ratio rising to a two-year high of 76.1% by the end of June, according to data released by the National Bank of Hungary (MNB) on Wednesday.

The MNB published preliminary second quarter financial accounts data on Wednesday.

Although the net lending of the general government sector fell to just 2% of GDP in Q2, down from 6.2% in the first quarter, the seasonally adjusted figure still shows a deficit of 4.9%, down from 5.7% in January-March.

The general government's financing needs for the last four quarters, which capture trends better, declined to 5.5% of GDP in April-June from 5.8% of GDP in the first quarter, but this is still well above the official government deficit target of 4.5% for this year.

Meanwhile, Economy Minister Márton Nagy has just spoken in an interview published on Wednesday about the fiscal cash-flow problem caused by soaring public interest expenditure. In addition, he outlined that due to cautious household consumption and external factors, GDP growth this year could be only around 2%, and growth dreams will have to be abandoned for the time being:

In the second quarter, the Hungarian economy unexpectedly contracted again, and consolidated gross debt at nominal value was 76.1% of GDP (HUF 59,553 billion) at the end of June, up from 76% at end-March. The new figure represents a two-year high.

The report also reveals that net lending of households was equivalent to 7.9% of GDP in four quarters to Q2 2024 (HUF 6,212 billion), and that the net financial worth of households amounted to 115.2% of GDP at the end of June.

Cover photo (illustration): Getty Images