Largely good news on government finances

HUNGARY - In Brief 04 Jan 2024 by Istvan Racz

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Yesterday's sale of $2.5bn of 12-year USD-denominated bonds by ÁKK was met by good demand, and pricing was significantly more favourable than a year ago. The new bonds were based on a $5.8bn book, and the yield came out at 5.74%, 180bps over the US Treasury bond expiring in November 2033. Last January, ÁKK sold three USD bonds in an amount of $4.25bn, and the 10-year issue, the one that fell closest to the new bond of yesterday, was launched at a yield of 6.51%, representing a 280bps spread over US Treasury. According to latest MNB statistics, the government will have to redeem €2.02bn of long-term (over one year maturity) debt to non-residents in 2024, of which €1.06bn is FX-denominated, as regards the debt outstanding at end-September 2023. Finance Minister Varga announced this morning that the central government's cash deficit was HUF4593bn in 2023, marginally above the amount predicted by the Ministry in its forecast document of December 31. This represents 6.2% of GDP, against 7.1% in 2022, the lowest since 2019, the last pre-Covid year: Mr. Varga also indicated that the status of the 2024 budget will be reviewed by mid-February. It is widely expected that the original 2.9% approved deficit target will be raised. In recent days, economy minister Nagy, who has been promoted recently to the unquestionable No.1 figure of economic policy, gave an interview, in which he generally argued for looser fiscal policy at the EU level, speaking against the existing general rule of a 3% of GDP preferred ceiling for government deficits under the current conditions of a weak economy, in view of relatively loose and growth-supporting fiscal policies in the US and China. Regarding ...