Unprecedented disability data
The November deficit data now reported shows not only that the 11-month deficit collection, but also the long-term collection of the portfolio, shows that
There has never been such a one-month deficit in the Hungarian budget before.
At the end of the summary statement, the Ministry of Finance considered it important to emphasize this time
The government expects the deficit and debt rates to continue to decline after the successful economic recovery.
What is in the background?
The summary information provided by the Ministry of Finance in its preliminary data reveals that non-recurring items played a role in November’s huge deficit data, mainly On the pension spending side, about HUF 250 billion:
- For example, the government decided to increase the benefits. Accordingly, pensions rose by another 1.2% in November and the difference was paid to all concerned by a single amount through January. The additional increases also covered the 13-month benefits paid at the beginning of the year.
- Also in November, beneficiaries received a pension premium of HUF 80,000 this year.
Among domestic expenditures, the Prime Minister also highlights HUF 3795.5 billion spent on pensions as of the end of November and CHF 1,633.7 billion paid for curative and preventive benefits. In addition, significant expenditures include HUF 234.5 billion spent on road development, HUF 181.2 billion on transport sector programs, HUF 162.7 billion on the Hungarian village program, and HUF 3 billion as well.
High annual target achieved
The current deterioration in the budget balance is evidenced by a long-term view of the 12-month rolling balance of the central subsystem. The deterioration of the budget balance began in early 2020, and the crisis caused by the coronavirus epidemic last spring and the economic policy reactions and measures that have continued since then accelerated the unprecedented rapid build-up of deficits. There was a slight pause in the middle of this year, but the cumulative budget deficit of Hungary has continued to increase since then, as the government actively spends on economic policy measures to support large-scale investment and stimulate consumer demand (for example, additional benefits for pensioners).
As a result of the unprecedented deficit data in November, the general government accumulated a deficit of HUF 3,931 billion in the first 11 months (excluding local governments), much higher than the cumulative balance data for the first eleven months of last year. The annual cash deficit target, which was recently raised above 4,000 billion Swiss francs, was also very close. We have already reached 263% of the original deficit plan of less than HUF 1,500 billion.
If the government wants to maintain the cash flow deficit plan, it can run a deficit of HUF 93 billion this year in the last month of the year. At the same time, we would not be surprised if, according to the practice of previous years, December is again a significant minus, if the deficit targets calculated according to GDP growth data and the EU methodology allow. Looking back over the long term, the average deficit for the past month was Ft220 billion, and in the period after 2010 it was minus an average Ft350 billion.
However, it is important to note that if the government wanted to maintain its recently revised annual cash deficit target, the higher year-end spending in previous years would not be really relevant now.
Cover image source: Portfolio
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