A perplexing number on the December cash budget deficit

HUNGARY - In Brief 11 Jan 2021 by Istvan Racz

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No doubt, the Finance Ministry cares to keep analysts busy, which is no reason for a complaint, of course.The monthly cash deficit of the central government for December has just been reported at HUF2251bn, an annualized 57.8% of GDP. No mistake, the figure is correct, and it is definitely an unparalleled record of records, as far as monthly deficit numbers are concerned. The cumulative annual cash deficit for 2020 thus came out at HUF5549bnor 11.9% of GDP, also an impressive number. And this time around the explanation had very little to do with the EU not paying its bills on time. In fact, the EU Commission paid no less than HUF665bn in reimbursement to Hungary in December, bringing the annual revenue from the EU to almost as high as the amount due from Brussels on the basis of the government's annual spending on EU programs. So the central government's cash deficit adjusted for the EU reimbursement gap, otherwise our favourite indicator, reached 11.8% of GDP for the year as a whole, so it was hardly different from the unadjusted figure.What indeed happened was that the government carried out a very substantial amount of extra spending in December, decided upon by the government cabinet on its own, using its mandate under the existing extraordinary legal regime. Of these, some HUF1200bn or 2.6% of annual GDP went on what they call "fund-securing measures" (literal translation), which is a collective name for the recapitalisation of various government-owned companies, pubicly controlled funds and foundations, eg. through the National Asset Management Inc., the Hungarian Development Bank, the settlement of the accumulated debts of hospitals, etc. We are going to provid...