The Orbán government accumulated a HUF 1,585 bn (EUR 4.3 bn) deficit in the month of February, Hungary’s biggest February, and second-biggest monthly deficit ever writes Hungary Today
This is equivalent to nearly 3% of the whole yearly GDP and also almost half of the deficit previously planned for the whole 2022 year, leftist daily Népszava reports. With a small surplus in January, the two-month overall balance is slightly better with the year-to-date deficit accumulation at ‘only’ HUF 1,433 billion. However, analysts believe that to tackle the problem, a sharp tightening in fiscal and monetary policy is absolutely necessary after the parliamentary elections.
The Hungarian budget posted a HUF 1,585bn (EUR 4.3 bn) deficit in February, which is the second-worst monthly figure and worst February figure ever in Hungary. Several drivers are behind the substandard numbers. One important factor is the Orbán government’s generous handouts before the parliamentary elections.
This month, families raising children received their personal income tax paid in 2021, pensioners received a 13-month pension, and those employed by the armed forces and law enforcement agencies got a six-month bonus payment. Additionally, the government has also decided on significant tax cuts in January. As a result, people under the age of 25 are receiving a full PIT exemption, while the payroll tax has been reduced.
In addition, the financing of the low, state-regulated energy prices of Hungary – a cornerstone of the government’s election campaign – requires HUF 1,000-1,500 bn alone. (EUR 2.72 – 4.07 bn)
The government had already announced that they wanted to achieve a deficit of 4.9% instead of the planned 5.9%: this would mean an additional HUF 500 billion in spending and deficit cuts.
However, at the end of February, the war broke out, leading to several new, previously unexpected sources of expense for Hungary.
Refugee-related, economic and defence spending has soared by hundreds of billions of forints.
As a significant share of the above-mentioned spending is not covered by the budget, an adjustment of up to 2-3 thousand billion forints (EUR 5.43 – 8.15 bn) may be necessary after the elections, according to Népszava.
This explains why Finance Minister Mihály Varga said last week that after the elections – if the Orbán government remains in power – a readjustment of the budget will be needed due to the scale of the budget deficit.
Regardless of who wins the upcoming elections on April 3rd, however, there will no choice but to cut budget spending and increase revenues, Népszava underscored in its article.
