According to Mihály Varga, the high share of foreign working capital also confirms the attractiveness of the Hungarian economy.Continue reading
The government expects most of the country’s economic indicators to be favorable next year, and the cabinet has based the 2024 budget on this, in which, as in the 2023 budget, priority is given to defense and maintaining the utility cost reduction. The majority of analysts believe that the Hungarian economy is on the verge of a positive turnaround, and that it could return to growth above four percent next year, Világgazdaság writes.
One of the key cornerstones of the adopted budget is the reduction of the public deficit to 2.9 percent of GDP. The European Union suspended the Maastricht criteria on public deficit requirements for three years after the outbreak of Covid-19 in 2020. However, from 2024, Member States will have to comply with the Maastricht requirements again, i.e. keep the public deficit below three percent.
Over the past three years, the Hungarian Government has made use of the easing allowed by the European Commission, but has been careful to comply with the rules, and this year the Finance Ministry has planned the deficit at 3.9 percent.
The National Assembly has set the expenditure headline for the central sub-system of the general government at HUF 40,755 billion (EUR 104.3 billion), the revenue headline at HUF 38,240 billion (EUR 97.8 billion), and the deficit at HUF 2,514 billion (EUR 6.4 billion) for 2024.
This May’s deficit was the fifth lowest monthly deficit in seven years. The government has set a fiscal target of 2.9 percent for 2024, and meeting this will be a major task for the cabinet. Árpád Kovács, chairman of the Fiscal Council, pointed out that the budget is subject to a number of risks, including lower-than-expected GDP growth and a possible lower-than-expected revenue out-turn, as well as a continued delay in the disbursement of EU funds.
Experts at the Central Bank expect economic growth next year to be between 3.5 and 4.5 percent, with most analysts also expecting the Hungarian economy to expand above four percent on a sustained basis from 2024.
A significant increase in gross domestic product is also probable on the back of the large-scale investments announced in recent years, which could lead to a resumption of accelerating economic growth in the medium term.
NBH Bank analysts forecast an economic growth of one percent this year, as the impact of the Russian-Ukrainian war and the energy crisis will be felt strongly. Gergely Suppan, the bank’s senior analyst, noted that
agriculture is likely to perform better this year than in 2022, due to the severe drought, with the outlook being much more promising now than a year ago due to more precipitation.
Meanwhile, the public debt is also being weighed up. Looking at the deficit and growth target alongside next year’s budget data on the evolution of public debt, a positive evolution can be observed for next year’s numbers. The public debt-to-GDP ratio is expected to fall to 66.7 percent by December 31, 2024, a three percentage point reduction from the end of this year, according to calculations. By the end of this year, public debt is expected to fall to 69.7 percent.
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