Economy 8 October 2024, 12:27pm

Hungary posts sizeable budget surplus in September

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Hungary's budget posted a surplus of HUF 234.2 billion in September 2024, the second-largest for the month in the past 23 years, according to preliminary data published by the Finance Ministry on Tuesday. This brings accumulated cash deficit to around HUF 2,600 billion, which also means that the government could be up to something very interesting in the last three months, given that its recently revised annual deficit target leaves room for a gap of HUF 2,100 billion in the last quarter.

The second-best budget balance for September was achieved last month, according to the Finance Ministry. It explains this by saying that "with the measures taken this year, the government has improved the fiscal manoeuvring room by more than HUF 1,000 billion". The ministry is referring to the tax increases and the HUF 675 billion in investments put on hold.

In a brief statement, the ministry shares some cumulative revenue and expenditure figures for the first nine months of the year, from which we can draw some conclusions about what happened in September:

the state spent HUF 432.255 billion on pension benefits, 11.1% more than in September last yearé
it transferred HUF 213.1 billion from the fund for curative-preventive care, up 6.6% yr/yr;
HUF 197.8 billion was spent on interest expenditure, a significant increase of 43% year-on-year;
EU receipts more than doubled in September this year in annual terms, reaching HUF 243.3 billion,
while spending on EU programmes fell to HUF 65.7 billion, down from HUF 178 billion last year;
i.e. the balance of EU programmes improved the overall budget balance by HUF 177.6 billion this year, while last year it worsened it by HUF 60 billion.

... gearing up for a massive shortfall

By the end of September, the central government sub-system closed with a deficit of HUF 2 623.5 billion. Within this, the central budget showed a deficit of HUF 2 607.9 billion, extra-budgetary funds showed a surplus of HUF 186.8 billion and the social security funds incurred a deficit of HUF 202.4 billion, the ministry said.

Compared to previous years,

this year's deficit trajectory does not stand out so far, but the coming months could be very interesting.

It is important to note that it was revealed last week that the government has increased its cash deficit target for this year to HUF 4,790 billion from the last revised target of HUF 3,981 billion .

Consequently, if the government sticks to this new cash deficit target,

it could allow itself a deficit of 2,166.5 billion forints in the last three months.

It is also important to note that this huge accumulation of deficits in the last quarter is not unusual in the light of previous years: in 2020 the gap was nearly HUF 3,300 billion, in 2021 HUF 2,800 billion, in 2022 HUF 2,000 billion and in 2023 HUF 1,300 billion.

Taking into account the new target, the annual cash deficit target for the whole year was 55% at the end of September, which seems low at first sight, but is not a coincidence. The government last week significantly increased the annual plan.