ÁKK released a financing plan for 2021 today

HUNGARY - In Brief 14 Dec 2020 by Istvan Racz

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A few days ago, the Finance Ministry let the world know that the main general government deficit target for 2021 had been raised to 6.5% of GDP from the original 2.9%, which was set in June. However, the deficit would be reduced from the current official forecast of 8-9% of GDP for this year.This afternoon, the Finance Ministry translated its new (accrual terms) deficit target into a net borrowing requirement of HUF3332bn or 6.8% of GDP. Based on this number, ÁKK expects net debt issuance of HUF2600bn, the rest to be covered by using up the proceeds from this year's above-plan FX bond issuance. Of the total, ÁKK expects HUF1000bn net to come from retail bonds, on the back of gross issuance that is 19.5% smaller than this year. This is possible because significantly less of retail bonds will mature next year than in 2020.The rest would be covered mainly by HUF-denominated bonds, of which the Treasury would issue HUF4433bn next year, 14% less than in 2020. However, no new FX-denominated bonds would be issued in 2021, to keep the share of FX debt below 20%.We estimate that the government debt ratio (gross) would rise to around 78% of GDP by end-2021, from around 76% expected for end-2020 and 65% recorded in December 2019.