Officially estimated fiscal deficit just slightly below the 2022 actual, exceeds revised target

HUNGARY - In Brief 02 Jan 2024 by Istvan Racz

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Meeting a legal requirement, the Finance Ministry published its revised macroeconomic forecast tables on December 31. In these, the Ministry estimated the annual general government deficit by Eurostat method at 5.9% of GDP, slightly below the 6.2% actual of 2022, and materially exceeding the revised 2023 target of 5.2% of GDP. To us, this was no surprise at all, as we expected the annual deficit at 5.8% of GDP in our October forecast. The basis for that forecast was the assumption that the government would eventually position its deficit very moderately below the 2022 actual, to create room for more spending in 2024 by bringing forward expenditure to 2023 as much as possible. We believe that this was most likely what happened. The government appeared to be in the position to meet its revised target, but it would have made little sense, as they have survived all 2023 reviews by rating agencies without any major criticism regarding the budget's position, and as the EU's recommendations to reduce the deficit further represent only advice rather than being compulsory. The Ministry's new forecast tables did not say a word about the end-year debt ratio, but we think it must have been around 72% of GDP, also just slightly down from 73.3% at end-2022. For 2024, the approved deficit target is the equivalent of 2.9% of GDP. It is widely unexpected to be met or even approached closely. We see essentially zero likelihood for that target to be reached: our current forecast for the 2024 fiscal deficit is 4.5-5% of GDP, with a little bit of further reduction of the general government's gross debt ratio.