Good news on fiscal policy: a small monthly budget surplus in September

HUNGARY - In Brief 14 Oct 2023 by Istvan Racz

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Just as a reminder, the general government's accrual-method deficit, the main fiscal indicator, was 6.8% of GDP in H1, and that figure was derived from an 8.1% of GDP cash deficit of the central government in the same period. Since then, the monthly records of the latter indicator have shown further improvement, with the cumulative eight-month deficit decreasing to 6.8% of GDP. This was encouraging, but it still has left the government with a tough task of achieving further improvement in the rest of this year, even after the most recent amendment of the annual deficit target (for the accrual figure), to 5.2% of GDP from the previously held 3.9% number. From this point of view, it is important that the central government reported a 0.5% of GDP monthly surplus for September, which has pulled the nine-month cumulative deficit further down to 5.9% of GDP: Note: As % of GDP; Sources: Ministry of Finance, KSH, own estimates At this moment, there is hardly any detail available on these preliminary figures, (which tend not to change at all when the details are also reported a bit later on,) but it must be clear from the chart above that there is no standard pattern of seasonality supporting the budget's performance in Septembers. It is also unknown for now, how the accrual-method government sector deficit might have been standing in Q1-Q3, but the cash-based central government figure suggests that it must have been close to the amended annual target number, in terms of a ratio to GDP. So yes, fiscal policy will have to remain tight in Q4 anyway, but after the Q3 improvement in the central government balance, there seems to be no need for further major adjustment, over and abo...