Hungary's five-month budget deficit nearly 85 percent of annual allowance

Hungary's budget deficit for May, excluding local governments, was 99.2 billion forints (over 412 million U.S. dollars), while the figure for the first five months of the year was 736.2 billion, or 84.6 percent of the annual deficit anticipated for the year, calculating with a 3.8 percent of GDP deficit, the National Economy Ministry announced on Monday.

In the corresponding period of 2009, the country had reached 61. 3 percent of its annual deficit target.

The Finance Ministry had forecast a 719.4 billion forint deficit for the end of May, amounting to 82.5 percent of the annual anticipated amount.

Government economics expert and state secretary in the prime minister's office Mihaly Varga called the deficit announcement proof that the previous government, from which the new administration has just taken over, failed to report true figures. Speaking at a news conference on the third day of a special cabinet meeting, Varga called the numbers higher than anticipated.

Analysts polled by local wire service MTI disagreed. The figure is barely higher than the amount the old Finance Ministry had anticipated, and there is every chance that the 3.8 percent annual target can be met, they said.

Public financing in Hungary is seasonal in nature, so 85 percent at the five-month stage is to be expected, said MKB Bank analyst Zsolt Kondrat. Inflows from business profit taxes were low during the first five months of the year while wage figures were higher. Zoltan Adam of Takarek Bank said the budget was evolving along the lines anticipated by the former government.

Both analysts agreed with the central bank's analysis which predicted that if the government used up its reserves its deficit would be 4.5 percent of GDP, while if it did not, the deficit would be 4.3 percent. However, given "last week's communications rampage" by certain members of the government party, they will now have to target the 3.8 percent goal set by the previous administration, Adam said, adding that the European Commission would insist on it.

Kondrat called a 3.8-4.5 percent deficit a matter of political will and noted that if it rose higher than that towards the end of the year the new administration would have to act.

[Source: Xinhua, Budapest, 07Jun10]

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