At the end of the third quarter, the deficit was already much higher than the government had planned for the entire year. More money went to pensions and financing the national debt.

In the first three quarters of 2023, the government sector deficit reached 2,997 billion Hungarian forints, or 5.4 percent of GDP, the Central Statistical Office (KSH) said in its report. This is a very bad number, as the original budget deficit target for the full year was 3.9% of GDP. The Ministry of Finance raised this amount to 5.2 percent in the fall. According to the ministry’s forecasts published at the end of December, the deficit is expected to reach 5.9 percent.

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According to KSH, in the first three quarters compared to the same period in 2022, revenues increased by 2,467 billion Hungarian forints, or 12 percent. Excise tax revenues rose by 1,107 billion Hungarian forints, or 12.8 percent, with the largest increase, including

The increase in revenue from special taxes and local business tax was significant.

Income tax revenues exceeded the previous year by 647 billion Hungarian forints, or 19.4 percent. Social security contributions amounted to 697 billion Hungarian forints, 14.8 percent higher.

Expenditures increased by 3,829 billion HUF, or 17.3 percent, compared to the first three quarters of 2022. The increase in paid employee income amounted to 231 billion HUF (4.6 percent). Regarding cash social benefits, the increase amounted to HUF 1,000 billion (19.9 percent), including payments for retirement benefits increased by HUF 784 billion, or 22.3 percent.

Interest expenses rose to 2,469 billion Hungarian forints, twice that amount.

As can be seen from the numbers above, the budget was flipped primarily due to the large increase in pension and interest expenses. At the same time, revenues also increased nicely – although revenues from the general sales tax were much lower than plan, owing to lower household consumption due to higher inflation.

The shift in spending also occurred mainly due to inflation. As for pensions, due to the higher inflation rate than planned, the state had to give a larger increase in pensions. The increase in interest expenses is also linked to inflation: in order to suppress inflation, the central bank has implemented radical increases in interest rates.

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