Unprecedented fiscal data: a general government surplus in Q1-Q3 2016

HUNGARY - In Brief 05 Jan 2017 by Istvan Racz

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Well, it is perhaps no great surprise any more, given the release of a very strong net financing capacity number about a month ago. Yet, it is history because it is unprecedented. The government's ESA2010 balance, the main indicator watched by the EU and everyone else, was a surplus equivalent to 0.6% of GDP in Q1-Q3 2016, a sharp improvement from a deficit of 1.8% of GDP in the same period of 2015. Revenue was up by just 1.4% yoy, pretty moderate compared to a 3.3% yoy growth of nominal GDP, whereas expenditure fell by 3.7% yoy, due to very low spending on fixed investment mainly.Importantly, the surplus is unlikely to stay for any long time. As we reported earlier, the Economy Ministry predicted a deficit of 2.1-2.3% of GDP for full-year 2016, actually up from a 1.6% of GDP deficit in 2015. As the central government's cash budget was largely balanced in October and November, this is only possible if an extremely massive deficit was generated in December. Preliminary actuals will be reported on this Friday. It is publicly known already that in December, the government paid out some HUF576bn (1.7% of GDP) under EU-backed development programs. But these will only add to the ESA2010 deficit if they represent advance payments not endorsed by the EU Commission. It is currently unclear how much this is the situation, and consequently, it is very difficult to assess how much the government's full-year deficit forecast is realistic. They were evidently trying to spend very large amounts in the last few weeks of 2016, but the monthly deficit required to reach their forecast was indeed very big as well. Anyway, we will hear more within a few days, and it seems the debt ratio is...