According to its Winter Forecast published earlier today, the European Commission expects that fiscal deficit will be higher than anticipated by the Hungarian Government. Contrary to Brussels’ expectations, however, Hungary is certain of achieving a fiscal deficit of well below 3 percent.

The forecast of the Commission is mistaken, as it comes to a deficit figure of more than 3 percent by calculating with negative growth of 0.1 percent. As the Government continues to expect economic growth to be almost 1 percent, the deficit will accordingly remain well below 3 percent.

In its estimate, the Commission disregards several elements which may point to a more favourable deficit figure. A downward correction for 2013 economic growth cannot be the argument for a higher deficit forecast. The Commission fails to take into consideration the positive fiscal impact of several measures, such as those aimed at greater economic transparency, the connecting of cash machines with the tax authority or the introduction of the e-toll system. In light of preliminary financial accounts, the net financing requirement of the state budget amounted to only 2.1 percent of GDP in 2012, which implies that the initial situation regarding the accrual deficit of the state budget is better than formerly anticipated and this should have been taken into account by the Commission in its forecast. In 2012, the Government took a number of steps in order to downwardly correct the Commission’s actual (above 3 percent) deficit prognoses.

The Government of Hungary emphasizes that the current Commission forecast is only preliminary and the final prognosis is expected to appear in the Spring Forecast in May. Despite the current forecast, the Hungarian Government trusts that thanks to successful fiscal policy the excessive deficit procedure, ongoing since 2004, will be terminated. The Hungarian Government continues to be of the view that the budget deficit will remain well below 3 percent in 2013.

(Ministry for National Economy)