January 8, 2018 / 3:29 PM / in a year

Hungary posts big December budget deficit, full-year gap below target

BUDAPEST (Reuters) - Hungary’s budget deficit surged in December largely due to higher spending on EU-financed projects but the full-year deficit undershot the 2.4 percent target, an Economy Ministry state secretary told national news agency MTI on Monday.

Prime Minister Viktor Orban’s right-wing government faces an election this April. Last year it accelerated all EU-funded projects, aiming to draw down on as much money as possible from the available development funds.

Investments financed from EU money have also been an important driver of economic growth.

Preliminary data showed that the budget posted a 334.9 billion forint (956.39 million pounds) deficit in December in cash-flow terms as the government pre-financed around 1 trillion forints worth of EU-backed development projects, with the money from Brussels due to arrive later.

This pushed the cash-flow based deficit to 1.974 trillion forints, well above the target of 1.2 trillion, state secretary Peter Banai told national news agency MTI.

However, this 1 trillion forints worth of pre-financing needs to be booked as revenues under the EU’s accounting method, Banai said, adding that the 2017 deficit was expected to come in around 2 percent of GDP, below the target.

In December the Economy Ministry already flagged that there was a possibility of undershooting its 2017 deficit target.

Tax revenues were 609 billion forints above the 2016 tax revenues, partly due to higher employment, Banai said.

Net debt service costs in 2017 were 70 billion forints lower than in the previous year.

Reporting by Gergely Szakacs and Sandor Peto; Editing by Alison Williams

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