Fresh data, old themes

HUNGARY - In Brief 08 Feb 2017 by Istvan Racz

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Two new pieces of statistics, one on the government budget and one on industrial output, seem to reinforce the old trend: robust performance on financial equilibrium, combined with a weak showing on economic growth.1. The good news is about the January cash balance of the central government, which came out at a HUF123bn (4.2% of GDP) surplus, following a surplus of HUF92bn (3.2% of GDP) in January 2016. Before wrongly suggesting that this could be about normal on seasonality grounds, we hurry to note that (a) this was the biggest ever cash budget surplus achieved in January; and (b) over the last 16 years, there were only three Januaries when a surplus was reached. Details are not available yet, but the little the Economy Ministry have given away on the story so far suggests that it was a mix of structural and one-time factors. More specifically, tax collections went well in general, but a one-off event was the collection of sizable sales proceeds out of land privatization.The conclusion from this must be that the government remains genuinely cash-rich, with a likely dampening effect on bond yields. Importantly, December's massive spending rush left the Treasury's liquidity pretty match unscathed. Despite the fact the central government's gross debt ratio was reduced moderately in 2016, to 72.3% of GDP from 72.6%, government bank deposits still reached HUF2,223n or 6.3% of GDP at end-year, much higher than the HUF1,512n or 4.4% of GDP level measured at end-2015. Going forward, we expect loose fiscal policies this year, but the government can also count on substantial cash proceeds from reimbursements due from the EU. This just suggests that the government will likely b...