Budget 2017: Hungary To Spend €3.7 Billion More Than It Should Next Year
Hungary’s budget is expected to run a cash-flow-based deficit of 1,166.4 billion forints (EUR 3.7bn) next year, well above the 761.6 billion gap targeted for 2016. The 2017 budget bill targets revenue of 17,374.9 billion forints and expenditures of 18,541.3 billion. As announced earlier by the Hungarian government, the budget is separated into three pillars: revenue and spending for the day-to-day operations of the state, as well as for investments funded by the state and by the European Union.
Revenue and expenditures for the operation of the state both balance out at 14,679.7 billion forints. The pillar for state-funded investments shows revenue of 1,132 billion and expenditures of 1,604.4 billion, with a 472.4 billion deficit. The pillar for EU-funded investments shows revenue of 1,545.2 billion forints and spending of 2,239.2 billion, with a deficit of 694 billion. The government classifies 2,496.5 billion forints of next year’s VAT as operating revenue and 1,034.6 billion forints as revenue related to investments.
Revenue from personal income tax is targeted at 1,787.4 billion forints, compared with 1,658.4 billion forints in 2016. Revenue from the bank levy is set to fall to 66.5 billion forints next year from this year’s 79.2 billion forints. A further 18.5 billion forints is allocated for real estate investments and purchases and 12.7 billion forints for acquisition of equity and capital raises by the National Asset Management Company MNV. Just under 100 billion forints is allocated for a capital raise at the project company for the upgrade of the Paks nuclear power plant. Year-end public debt as a percentage of GDP is expected to fall to 71.9% next year from a targeted 73.5% at the end of 2016, continuing on a downward path as required by the constitution.
The government projects a marked 9.1% increase in gross fixed capital formation, or investments, next year, after a 1.8% fall forecast for this year. The prime minister’s office and its related institutions will altogether get 949 billion forints. The budget chapter on the office targets 47 billion forints in revenues. The budget earmarks 33 billion forints for the prime minister’s office alone and targets operating revenue of 4 billion forints. In health-care spending, funding for general practitioners’ surgeries will rise by 112 billion forints to 746 billion forints. The government will spend 2,059 billion forints on the health insurance fund compared with 1,963 billion forints in 2016.
Spending on local governments will rise by over 6 billion forints from this year’s 662 billion forints to 668.38 billion forints. The police and security forces that fall under the jurisdiction of the interior ministry will see a significant budget increase while spending on the ministry itself is set to drop slightly in 2017. The defence budget will increase by 51 billion forints to 350 billion forints, or 0.94% of GDP. In 2012, the government adopted a resolution in which it pledged to increase defence spending to 1.4% of GDP by 2022.
Spending on old-age pensions will go up from this year’s 2.473 billion forints to 2.501 billion forints next year. Orphan support will drop slightly from 34 billion forints to 31 billion and funding for widow’s pensions will be 334 billion forints compared with 338 billion forints in 2016.