Hungary’s Budget Council said external economic and geopolitical tensions, rising energy prices and a severe domestic drought pose risks to the 2.0 percent growth now expected in the government’s budget amendment bill, down from an earlier 4.1 percent forecast.
Deficit targets rise sharply
The council highlighted a rise in the GDP-ratio deficit target from 3.7 percent to 7.5 percent, matching expectations set in July, reflecting a high deficit early in the year and a changed macroeconomic environment. The central government subsystem’s cash-flow deficit target increased to 7,110.1 billion forints for the full year, with 3382 billion forints recorded in the first half.
The council welcomed the incorporation of the increased deficit target into law, saying it improves transparency in assessing fiscal outcomes. However, net primary expenditures growth is expected to exceed the ceiling set by EU rules.
Debt and fiscal control concerns
The Budget Council noted that although an exemption clause applies due to higher defense spending, the expected GDP-ratio deviation of 1.9 percent on the control account still surpasses the regulatory maximum of 0.6 percent. Government debt rose to 75.6 percent of GDP at the end of the first half and could reach 77.5 percent by year-end, driven by the larger deficit and growth in liquidity reserves.
The council said the forint’s strengthening against the euro moderates fiscal pressures but highlighted risks around the forecast year-end exchange rate of 357.5 forints per euro.
Medium-term outlook
The government is set to prepare a new medium-term budget-structural plan in October. The plan is expected to target a gradually narrowing deficit path and a decreasing government debt ratio as part of fiscal consolidation efforts.
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Source: Hungary’s Budget Council
