Government expects the 2017 fiscal deficit below target

HUNGARY - In Brief 04 Jan 2018 by Istvan Racz

---

The Economy Ministry released the government's new macro forecast the other day. In this, they estimated the 2017 fiscal deficit at 1.9% of GDP, exactly the same level as the 2016 actual, and conveniently below the 2.4% annual target. An important contribution to this relatively good result was a local government surplus of 1.6% of GDP. The latter is unusually high, of course, and the reason why the Economy Ministry included this figure in its estimate was the existence of a big amount of money that was disbursed to local governments under various EU-backed development programs but had not been spent yet by the end of 2017. Just as it happened in late 2016, a big deficit at the general government's level must have been generated in Q4, as in January-September, the fiscal balance was still a surplus of 0.5% of GDP. All these figures represent accrual (ESA-2010) data.Despite the expectation of a better-than-target fiscal balance for 2017, the Economy Ministry left its deficit forecast unchanged for 2018, at the 2.4% of GDP target level.Regarding the general government's gross debt ratio, the Ministry estimated 72.4% of GDP for end-2017, down from the 73.9% value reported for end-2016. Both of these figures are expected to change upwards by an extra 2.1% of GDP soon, as Hungary is about to lose its long-standing debate with Eurostat, according to which Eximbank, Hungary's publicly owned export-import financing agency is to be accounted for as part of the general government sector, as opposed to the so far followed official method of treating it outside the government. This change is now likely to go through as soon as Hungary reports its actual fiscal figures for 2017, as...