[ad_1]
Key analysis and exclusive content under the tree. You can even give someone a last minute gift with a one-year subscription to Portfolio Signature. And if you buy an annual subscription for multiple friends, friends and family at the same time, you can also get a quantity discount. So in addition to being a useful holiday gift, it can even support the production of quality inexpensive content. Know more
This very morning, the Portfolio wrote that next year’s budget figures adopted in the spring have been wiped out for life. The trajectory of economic performance in 2020-2021 will be much deeper than previously planned, which will mean a smaller tax base and less revenue next year. The new elements of family support, the first tranche of the 13-month pension and other measures to increase individual spending will also increase the budget deficit by many hundreds of billions of florins.
In light of this, the budget deficit target of 6.5% of GDP for next year may seem realistic or even more optimistic. Of course, the uncertainty is huge, as the growth trajectory can still be estimated with an extremely large standard deviation due to the coronavirus crisis.
The recent PM forecast means that the deficit could be reduced by 1.5-2.5 percentage points this year, but we will still see the second-highest deficit in the last 15 years (after this year, of course). The 6.5% deficit may also mean that the debt ratio is not on a downward path next year, as the government plans, and we still need to know its expectations for next year’s growth. In any case, public debt could rise to close to 80%, below the peaks observed during the financial crisis.
The moderate deficit reduction is not only in line with expectations given the macroeconomic trajectory and government action. The government has repeatedly pointed out that the budget can only be consolidated as a result of a multi-year process, primarily because a sudden deficit reduction would hamper the prospect of a rapid recovery from the coronavirus crisis.
Just yesterday, Fitch’s credit rating drew attention to the fact that the deficit across the region may slowly decline. “Countries in the region are likely to curtail stimulating budget spending in 2021, and this will result in smaller deficits than this year, but Central and Eastern European governments are unlikely to embark on a more marked fiscal tightening,” they wrote. . It is true that if Fitch’s forecasts are correct, the Hungarian deficit will hang in the region: they calculated a budget deficit of 4% on average in the region.
It should be remembered that according to the government’s spring plans, Hungary may be among the winners in the medium term managing the crisis with measure, because the deficit and public debt will not skyrocket, so it will be among the least vulnerable countries with the least needs adjustment. It has long been clear that this plan will not materialize. Government spending eventually grew a lot, but it could not stem the economic recession caused by the crisis; critics say it was because the spending was neither purposeful nor efficient at all.
[ad_2]
