Relatively favourable fiscal outcome in August

HUNGARY - In Brief 13 Sep 2020 by Istvan Racz

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The central government's cumulative cash deficit came out as HUF 2261bn or 7.4% of GDP in January-August, slightly down from the 8.1% reported in July and the 8% number recorded in H1. To a great extent, the improvement was due to the collection of HUF 283bn in reimbursement from the EU in August. Adjusted for the EU reimbursement gap, there was a small further deterioration in August, as the adjusted cumulative deficit rose to 6.1% of GDP from the 5.9% recorded in January-July.But even so, the adjusted number looks relatively favourable in comparison with the 7-9% revised annual forecast, which the Finance Ministry announced some three weeks ago. It seems to us that after two revisions of the annual deficit target made earlier in the year, the Ministry wanted to tell all the bad news in one round, setting a forecast range which provides the government with sufficient flexibility for the rest of 2020.In related news, the ÁKK completed its FX bond issuance plan of EUR 4bn set for this year, by placing a series of samurai bonds, in a total value of EUR 0.5bn, a few days ago. From this point onwards, the emphasis in financing will have to be placed on HUF-denominated bonds, of which a net amount of HUF 1278bn is to be issued between end-July and end-December, according to the latest revision of the annual financing plan. Meeting the latter target will most likely be greatly helped by the MNB's direct purchases and long-term collateralised loans.