General government deficit at 4.6% of GDP in January-September 2020

HUNGARY - In Brief 06 Jan 2021 by Istvan Racz

---

This was reported yesterday, as the main fiscal indicator, an annualized number compiled on accrual basis, following the EU's ESA-2010 government finance statistics methodology. In a quarterly breakdown, there was a 1.2% of GDP deficit in Q1, followed by 8.4% in Q2 and 4.1% in Q3. The quarterly pattern of the deficit reflects quite well the development of the Covid epidemic during last year.Most importantly, the cumulative deficit appears to be rather moderate in international comparison and also compared to the standing official forecast of 9% of GDP for the year as a whole. It appears to substantiate our long-standing claim that the actual fiscal trend has been much more favorable than the one suggested by Finance Ministry predictions. The reader will most likely recall our earlier view, which we are still maintaining, that the 9% deficit forecast is much more the maximum that the government has believed to be affordable without raising eyebrows high among investors and rating agencies than the level which they have expected to get by implementing the then-existing set of fiscal policies.Going forward, getting to the 9% annual deficit figure would require no less than an annualized 21% of GDP fiscal gap in Q4 alone. There is no way in our view that the economy could have realistically required or adsorbed this much of net government spending in the last three month of 2020. We know from November's cash figures for the central government and the many spending decisions taken by the government cabinet in December that they were indeed trying hard to dispose of large amounts of public money, and it is also evident that the second wave of Covid have seriously undermined ...