All sorts of good news on the 2015 budget, not very surprisingly

HUNGARY - In Brief 06 Jan 2016 by Istvan Racz

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Today's press conference held by economy minister Mihály Varga suggested that largely everything went really well with the implementation of the 2015 budget. Mr. Varga said that the Maastricht definition general government deficit came out around 2% of GDP, a historical low and materially below the 2.4% target as well as the 2.5% actual recorded in 2014. He also said that 'with great certainty', the gross government debt ratio ended 2015 below 76% of GDP, moderately down from the 76.2% level measured at end-2014, maintaining the downward trend recorded over the previous three years. Expenditure by the central government rose by HUF250bn or about 2% in an economy that grew by roughly 5% in nominal GDP terms last year, while tax revenue grew markedly faster, not least because of a 6.7% growth of the economy's total gross wage bill (higher wages + rising employment). In fact, the only remaining question is why the deficit figure came out this high, given that in Q1-Q3, the actual deficit was only 0.4% of GDP. The answer to this question is that the government eventually spent some HUF300bn (0.9% of GDP) more than planned on the pre-financing of EU projects and also took over some publicly owned utility companies' debts (which were generated due to a clear case of official under-financing previously). In other words, they were hasting to spend some extra amounts in the last days of 2015, in order to be able to run a fiscal policy in 2016 which is in fact expansionary but does not exactly look like that. The deficit target for 2016 is 2% of GDP, and to reach or somewhat outperform that from the 2% preliminary level of 2015 may appear as an achievement in terms of fiscal tig...