The minister said the “security measures” were necessary in part because of the negative fiscal effects of positive macroeconomic data, such as the impact of lower-than-expected inflation on revenue from VAT and excise tax. The Economy Ministry said on Thursday that 39.5 billion forints of the freeze would affect budget allocations for ministries, especially for extraordinary government measures.

The measures have a significant impact on the expenditures of the Investment Fund, on separate state funds and on spending related to asset management, it said. The ministry said higher employment and a crackdown on the shadow economy would counter, in part, the negative fiscal effects of low inflation.

It added the freeze was also necessary because some developments were expected to be carried out with national, rather than European Union, funding.

Fiscal Council chairman Árpád Kovács told the conference that the 2.9% deficit target is achievable, in light of economic trends in the first half as well as pro rata budget revenue and expenditures.

No significant risks are apparent on the revenue side, considering the favourable economic trends and the stabilisation of the tax system, and earlier government measures affecting the pension and drug subsidy systems are taking shape on the expenditure side, he said. The central bank said in a forecast on Thursday that the 2.9%-of-GDP budget deficit target for this year is achievable, but only with a part of reserves in the National Defence Fund.

At present the fund contains 100 billion forints (EUR 323m). The central bank calculates that primary revenues targeted in this year’s budget will come in, but their structure will differ from the plan. Taxes on consumption are expected to be smaller than planned, but payroll taxes could compensate.

Primary expenditures are expected to be significantly higher than planned, in part because of an increase in the number of fostered workers, but mainly because of the government’s purchase of stakes in strategic companies, the NBH said.

The purchases of the stakes might not show up in the deficit calculated with European Union accounting methodology, it added. Downside and upside risks of this year’s budget are mostly even, notwithstanding the uncertainties of the macroeconomic environment, the central bank said.

Public debt as a percentage of GDP is expected to fall this year, but only slightly. Calculated at constant exchange rates, the Maastricht measure of the ratio should fall to 79.0% from 79.3% at the end of last year, the NBH said.

Source www.hungarymatters.hu

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