Non-interest central government cash deficit down in Q1

HUNGARY - In Brief 24 Apr 2025 by Istvan Racz

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Two days ago, when we released our new quarterly forecast report, we were still unable to give any breakdown of the Q1 cash balance of the central government, because the respective official data had not been published yet. So we could not present how exactly the annualised cash deficit ratio rose to 12.4% of GDP in Q1 from 12.1%  one year earlier and 12.2% in Q1 2023. However, the detailed official figures came out this morning and they are interesting.For simplicity, let us copy here the respective segment of the cash budget table of our country database:So, the key point is that net interest expenditure grew to 7.1% of GDP in Q1, from 5.8% in Q1 2024 and 3.2% in Q1 2023. The non-interest cash deficit actually dropped to 5.3% of GDP, as the second yellow-marked line from the top shows. And as incoming net transfers from the EU fell as well (see the third yellow line in the table) and the balance of those actually became slightly negative, meaning Hungary's government was a net contributor rather than a net recipient of EU funds in this period, the non-interest ex-EU cash deficit decreased even more sharply, to 4.9% of GDP in Q1, from 7.1% one year earlier, and from even higher levels in the previous two years.The conclusion is that fiscal adjustment actually continued to proceed early this year, but its impact was suppressed by rising net interest expenditure. And once again, the latter grew this high because of the concentrated payment of annual interest on PMÁPs (Premium Hungarian Government Papers), the ÁKK's HUF-denominated, inflation-indexed retail bonds, in the early months of the year. This year, this looked like the payment of 17.6% (the average rate of CPI-i...