Hungary’s government to defer €1bn of investment as budget gap balloons

by Cristian Florescu

Hungary’s government decided to postpone HUF350bn (€956mn) of state investments to boost reserves by the same amount as the budget recorded a historic HUF1 trillion deficit last month, according to a decree published in the official gazette on December 10. A day earlier Hungary’s finance minister lowered 2021 growth targets to 6-6.5% from 6.8%, write

The announcement came after the budget reported the highest monthly deficit of all time in November, which lifted the budget gap in the first 10 months to HUF3.9 trillion, just shy of the HUF4 trillion full-year target. That is two-fold higher than the initial budget target approved in the budget act in the summer of 2020.

The reboot of the economy has been a success, as GDP expanded 6.1% in Q3, investments grew 12% and employment rose to 4.7 million and the jobless rate dropped below 4%, a short statement of the finance ministry read. This all means that there is less need for stimulus through state investments, it added.

Finance Minister Mihaly Varga at a recent forum said the European Commission owes Hungary HUF320bn-330bn this year for a holdup of the approval of Hungary’s Recovery and Resilience Facility (RRF) plan.

He said Hungary’s GDP growth could be around 6-6.5%, revised from 6.8% earlier last month. Until the end of October, growth guidance ranged in the 7-7.5%, making Hungary’s economic recovery one of the steepest in the EU.

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