Cumulative Q1-Q3 2021 fiscal deficit reported at 4.1% of GDP

HUNGARY - In Brief 04 Jan 2022 by Istvan Racz

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At first glance, this sounds as good news. The corresponding-period figure for 2020 was 4.8%, so the deficit ratio fell moderately. And we are talking about the Eurostat-methodology, accrual terms data for the whole government sector, that is the single most important fiscal macro indicator. So it really matters.But let us wait a second with the judgment. As we reported in a previous note a few days ago, the Finance Ministry estimated a 7.5% of GDP fiscal deficit for the whole of 2021 in its usual end-year forecast. The latter is the same as the annual target, so it is no surprise in any way. But knowing the end-September state of affairs, the Ministry's forecast implies no less than HUF2409bn deficit for Q4 alone, representing 17.4% of the quarter's GDP. This reminds us of Márton Nagy's (currently senior advisor to the prime minister) prediction of some two months ago, that the fiscal deficit was likely to reach some 15% of GDP in Q4 2021 and Q1 2022, that is in the period remaining until the election. Moreover, the officially predicted Q4 deficit looks even bigger now.By the way (1), running a very large fiscal deficit in Q4 is not at all unusual for the Orbán cabinet. In Q4 2020, the deficit was HUF2173bn or 15.8% of GDP. This was how the annual deficit was pumped up to 8% of GDP in that year, from the moderate nine-month figure we mentioned above.By the way (2), as the dust is settling down somewhat around the massive end-year spending campaign, it seems that at least some of the extra went to support the local energy sector, in view of the deeply below-market fixed prices that the latter is allowed to charge to households on electricity, gas and pipeline heat. In ...