According to preliminary data, the deficit of the general government budget, calculated in accordance with EU methodology, was 2.2 percent of GDP last year, Minister for National Economy Mihály Varga said at a press conference as the Government of Hungary has sent a report of last year’s budget data to the European Union.
This figure places Hungary into the EU top league and it is even better than the deficit of 2.3-2.7 percent formerly expected by the Cabinet, Mr Varga stressed.
The Minister noted that last year Hungary exited the excessive deficit procedure and in light of last year’s favourable data “we have good reason to believe” that the process will not be restarted, he added.
Mr Varga also pointed out that the state debt-to-GDP ratio fell to 79.2 percent by the end of 2013, thus the level of debt has been decreasing for the third consecutive year and this trend is expected to continue next year. Back in 2010, he stressed, the debt-to-GDP ratio was 83 percent and besides Hungary only five EU member states have been capable of lowering this indicator.
As Hungary’s state debt is still too high (the level of debt almost doubled between 2002 and 2010), the Government has laid it down in the Basic Law of Hungary that the state debt-to-GDP ratio shall be decreased to below 50 percent, Mr Varga emphasised. He added that the level of debt has been declining since 2010, while state assets have increased.
Data have been sent to Eurostat following coordination between the Ministry for National Economy, the National Bank of Hungary and the Hungarian Central Statistical Office.
Talking about details, Deputy State Secretary for Budget Affairs Péter Benő Banai said that within the 2.2 percent of GDP shortfall the deficit of the central government sub sector was HUF 929.2bn, in line with the prior estimate, in 2013. Local governments closed the year 2013 with a surplus of HUF 121.9bn, which amount includes the repayment of debt ahead of schedule, some HUF 40bn, within the framework of the state’s debt assumption programme. As a whole, he stressed, the measures implemented by the Government have made the financing of local governments more sustainable in the long term.
As the Deputy State Secretary explained, the combined deficit of the state budget and local government would total 2.8 percent of GDP, but this figure is the result of a different calculation method. The latter figure includes the acquisition of state assets, such as the capital injection for purchasing E.ON and other capital increases, but these elements only increase state debt and not ESA debt, Mr Banai said adding that even so the state debt has remained on a downward path. Among adjustment items he also mentioned the capital increase for the savings cooperatives integration body. He stated that the National Assembly made the decision last year to increase capital by HUF 135bn at the integration body in order to boost lending for SMEs.
The Government has negotiated with Eurostat for a long time about the accounting of this item, and according to the view of Eurostat this capital injection of HUF 35bn is not to be calculated among state expenditures.
In the opinion of Mr Banai, the fact that the deficit was so favourable in 2013 provides a good basis for calculating this year’s budget and the Cabinet is also expecting a deficit figure below 3 percent for this year.
Mr Varga said that Hungary’s adoption of the euro may become a topic worth discussing by the end of this decade. Although the country already complies with two or three Eurozone accession criteria, competitiveness must be improved significantly before a favourable accession date could be named.
He also stressed that the Government does not have a forint exchange rate target and the budget is flexible enough to be adjusted if necessary to various exchange rates. He reiterated that he believes exchange rates are optimal provided they underpin economic growth.
Finally, he emphasised that although the competitiveness of the Hungarian economy is far better than it was four years ago, in the coming term it may be necessary to revise the New Széchenyi Plan and identify areas which must be handled in line with the “new economic policy guidelines”.
(Ministry of National Economy)
