Good news on the budget, bad news on politics

HUNGARY - In Brief 13 Nov 2022 by Istvan Racz

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For short, the good news is that the central government reached a pretty much non-seasonal cash surplus of HUF101bn in October, pulling the ten-month cumulative deficit for this year down to HUF2590bn or an annualised 5.1% of GDP, down from 5.9% of GDP in January-September. The annual cash deficit target is HUF3153bn or 5% of GDP, so they are doing pretty much all right with fiscal adjustment. On the other side, the bad news on politics is that the traditionally good relations between Hungary and Germany, the owner of by far the biggest chunk of FDI into Hungary, have deteriorated greatly at recent times, as it can be seen from the German parliament's negative resolution on the EU's rule-of-law vote regarding Hungary, and from Hungary's decision to block the EU's common borrowing action to finance a €18bn aid package to Ukraine. The two pieces of news are closely related, of course. The progress reached on cutting the fiscal deficit as quickly as possible is a rather clear-cut case. At this moment, hardly anything can be paid out by central government institutions other than regular salaries without a case-by-case approval from the responsible minister, and this is promised to remain so until end-December. The reason for this hard stance on fiscal adjustment is that decision-makers, most notably PM Orbán himself, see not much certainty about the government's energy costs in the forthcoming period and about the eventual outcome of the rule-of-law procedure, as regards Hungary's access to EU development funds. And they do not want to be forced to come out of the trench with both hands raised. On the political issue, a bit more deeply: - The German parliament has called u...