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IMF More Optimistic About Hungary's Economy As Budget Deficit Exceeds Full-Year Target In September

Tamás Székely 2015.10.07.

The International Monetary Fund (IMF)  has raised its projection for economic growth in Hungary this year to 3%. IMF’s previous World Economic Outlook forecast was 2.7%. The projection is just below the Hungarian government’s official forecast of 3.1% growth. As for next year, IMF projects Hungary’s GDP growth rate will slow to 2.5 %, raised from 2.3 % projected in April.

The IMF also said that consumer prices in Hungary would edge up 0.3% this year. In April it expected the consumer price index would be flat. Inflation is expected to rise to 2.3% next year, according to the IMF’s outlook, the same as the previous forecast. Hungary’s current-account surplus is seen reaching 5% of GDP this year, up from 4.8% in the previous forecast. Next year, the surplus is expected to narrow to 4.3% of GDP, albeit not as far as the 4.1% the IMF projected in April. The Fund projects Hungary’s unemployment rate will fall from 7.3 % this year to 7% in 2016. In April, the IMF projected the unemployment rate would reach 7.6% this year and 7.4% next year.

Economy ministry state secretary for public finances Benő Péter Banai said the IMF’s projections were almost identical to the Hungarian government’s. Among the reasons for the IMF’s raised growth forecast were Hungary’s structural reforms, labour market measures and fiscal consolidation. Regionally, only Poland and Hungary were highlighted by the IMF, he noted. The government projects higher growth in Hungary than the EU average. In the long term, however, the external environment could develop less favourably and this could have negative consequences, he added. The precondition for sustainable and healthy growth in the Hungarian economy is the same around the world and in Europe, he said. The Hungarian economy is open and its growth depends heavily on external orders and export volumes, he added.

Meanwhile Hungary’s cash-flow-based budget deficit, excluding local councils, was 954.6 billion forints at the end of September, a first reading of data released by the Economy Ministry shows. The shortfall was 106.9% of the 892.4 billion forint full-year target. The ministry noted that the deficit had reached 844.6 billion forints at the end of September last year and attributed the difference to changes in European Union funding. Tax revenues have significantly risen over the past 12 months, by around 500 billion forints. But chapter-administered allocations from the EU were lower than last year, by around 407 billion.

For the month of September, the deficit came to 39.7 billion forints compared with a 14.2 billion surplus in the same month a year earlier. The European Commission has lifted its suspension on paying EU funds and several hundred millions of forints could be transferred in the next month, lowering the deficit, the ministry added, noting that the deficit is front-loaded, as usual, with expenditures exceeding revenue in the first half of the year. The ministry confirmed the full-year deficit target of 2.4% of GDP, calculated according to European Union rules.

via hungarymatters.hu and MTI