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The Ministry of Finance now estimates that total government budget deficit will end up at 8-9% of GDP for this year. They have also raised the expected national budget deficit for 2021 from 2.9% to 6.5% of GDP. Fortunately, the newly accepted EU budget and recovery package may alleviate potential worries.

2020, please be over…

Just over the last month, the government has amassed a budget deficit of HUF 700 billion (EUR 2 billion). Last year during the same period, this was HUF 190 billion (EUR 540 million).

The total central government subsystem deficit for this year has thus surpassed HUF 3,200 billion (EUR 9 billion) according to the Ministry of Finance. At the same time last year, this number was around HUF 770 billion (EUR 2.2 billion).

Of the nearly 9 billion Euros, the central government budget deficit directly under the purview of the government is almost HUF 2,800 billion (EUR 7.9 billion). Social security funds are HUF 570 billion (EUR 1.6 billion).

Around HUF 600 billion (EUR 1.7 billion) went to buying healthcare equipment in connection with COVID. Governmental support for business-competitiveness necessitated by the pandemic came to HUF 180 billion (EUR 510 million).

The Ministry of Finance says that total central government subsystem deficit is expected to be 8-9% of GDP for the entire year. Before the pandemic, the government expected a total deficit of 1%.

Promise of tomorrow?

As a result of policies aimed at revitalizing the economy and defending against the pandemic, the government has raised the expected budget deficit to 6.5% for 2021, the statement made by the Ministry of Finance says.

Parliament accepted a budget with 2.9% deficit in late spring. It has since become apparent that there will be no rapid recovery. Neither the economy, nor taxes will grow in line with expectations.

Since according to the Ministry of Finance, planned deficit levels are impossible to achieve, the parliament should, in theory, change the national budget. However, Minister of Finance Mihály Varga said not three weeks before the end of the year that “the closer we are to 2021,” the clearer it will be what to expect in reality. The government has not brought the updated 2020 budget in front of parliament, either.

EU to the rescue

Despite all of the government’s budgetary woes, the acceptance of the new EU budget and coronavirus recovery package yesterday means that Hungary will receive almost EUR 8 billion in long-term, only partially repayable funding, and a further EUR 10 billion in low-interest loans. These alone offer enough funding for making up the deficit, on incredibly good terms that would likely not be possible through financial institutions.

Until the end of November, Hungary received around HUF 1020 billion (EUR 2.9 billion) from the EU. However, EU expenditure was HUF 1800 billion (EUR 5.1 billion).

In the featured photo: Finance Minister Mihály Varga. Photo by Tamás Kovács/MTI