National Bank Of Hungary: ESA Deficit Could Fall As Low As 1.6 % Of GDP By 2020

  • 30 Mar 2018 9:18 AM
  • Hungary Matters
National Bank Of Hungary: ESA Deficit Could Fall As Low As 1.6 % Of GDP By 2020
The National Bank of Hungary (NBH) in its quarterly Inflation Report is predicting that in the most favourable scenario, ESA deficit in 2020 could be as low as 1.6 percent of GDP while gross public debt ratio could drop to 66 percent.

According to the NBH, the ESA deficit may amount to 2.2-2.4 percent of GDP in 2018, while based on a technical forecast it may be 1.8-2.0 percent in 2019, and 1.6-2.0 percent in 2020.

Based on preliminary financial account data, the budget deficit was 1.9 percent of GDP in 2017, lower than the appropriation of 2.4 percent. Due to tax cuts and the exhaustion of one-off revenues from the previous years (land sales, tax credit for growth), the public finance deficit will increase temporarily in 2018.

Measures announced since the December Inflation Report (advance wage raises in healthcare for emergency medical staff, nurses brought forward from November, one-off pension supplements, winter-related utility cost reductions) amount to some 0.3 percent of GDP in expenditures, which, however, is offset by the rise in tax revenues resulting from favourable macroeconomic prospects.

Dynamically growing tax revenues from favourable macroeconomic developments and declining interest expenditures will contribute to the reduction in the deficit-to-GDP ratio following 2018. The forecast is significantly affected by the uncertainty related to the disbursement and utilisation of EU funds.

Advance payments for 2017 and 2018 are expected to gradually decline until 2020. The real economic impact of the payments, the actual utilisation of funds may be the highest in 2018 and 2019. This effect will stimulate the economy considerably, but through the increase in co-financing it will add to the budget deficit.

According to preliminary data, at end-2017 the gross government debt ratio was at 71.7 percent of GDP, down from 73.9 percent at end-2016. Government debt including Eximbank’s liabilities amounted to a total 73.6 percent of GDP at end-2017 still down 2.4-percentage points from 2016.

Substantial economic growth, falling interest expenditures and a positive primary balance all supported the decline in government debt. Government debt may decline to 70.3 percent of GDP in 2018.

As a result of growth and moderate deficit, the debt ratio may decline by 1.4 percentage points this year and 2 percentage points annually in 2019 and 2020, coming close to 66 percent by the end of the forecast period.

  • How does this content make you feel?

XpatLoop Media Partner

Hungary Matters

Launched in January 2014, this twice-daily newsletter covers 'everything you need to know about what’s going on in Hungary and beyond', according to its publisher the state media agency MTI. Click the title above for more info, and to subscribe.

Explore More Reports

  • NBH Policy Makers Keep Base Rate On Hold

    NBH Policy Makers Keep Base Rate On Hold

    • 25 Apr 2018 1:24 PM

    The National Bank of Hungary’s Monetary Council decided to keep the central bank’s key rate on hold at 0.9% at a monthly policy meeting.

  • National Bank of Hungary Sets High 'Must-Achieve'  Targets

    National Bank of Hungary Sets High 'Must-Achieve' Targets

    • 19 Apr 2018 8:48 AM

    An increase in incomes, expanding investments and lending growth are all necessary for Hungary to achieve sustainable convergence by 2030, National Bank of Hungary deputy governor Márton Nagy said at a conference organised by business news site Portfolio.hu.

  • Hungary’s State Debt, Including Eximbank, Reaches 73.6pc Of GDP At End-2017

    Hungary’s State Debt, Including Eximbank, Reaches 73.6pc Of GDP At End-2017

    • 3 Apr 2018 1:46 PM

    Hungary’s gross consolidated state debt, calculated according to Maastricht rules and including the liabilities of state-owned Magyar Eximbank, stood at 73.6 percent of GDP at the end of 2017, down from 76 percent at the end of 2016, preliminary data released by the National Bank of Hungary (NBH) on Tuesday show.