Important fiscal data from the Easter Bunny's basket

HUNGARY - In Brief 03 Apr 2024 by Istvan Racz

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Coloured eggs, a standard part of the Easter decoration of houses and gardens in most of Central Europe, is brought by the Easter Bunny in her basket, as far as the story presented to little children is concerned. This time around, the bunny also brought about some fresh fiscal data for Easter, as the detailed Eurostat-method numbers for 2023 and the cash data for the first two months of this year was just published. As it happened, the full-year 2023 general government deficit settled down at 6.7% of GDP, after a series of upward revisions of the official estimate. This was slightly up from 6.2% in 2022, and fit well into the 6.2-7.6% range, in which the deficit was seen in each of the last four years. Gross general government debt ended 2023 at 73.5% of GDP, marginally down from the upwardly revised 73.9% in the previous year, and a bit more significantly down from the 79.3% post-Covid local peak registered at end-2020. Details are quite telling. Most importantly, the general government's gross interest payments rose by 89% in 2023, rising from 2.8% of GDP in 2022 to 4.7%. Another key fact was a mere 5.4% increase by VAT-type production and import taxes, against the 12.9% expansion by total revenue and the 13.6% growth by nominal GDP. This is quite important, of course, as these taxes represent 22-24% of total fiscal revenue. So, the fiscal deficit, excluding interest payments, actually fell to 2% of GDP, from 3.4% in 2022. The ratio of revenue from VAT and the like to GDP shrank by 0.7%-points between the two years. This means that the government implemented a 2.1%-points worth of net fiscal adjustment on all other items together, which was obviously not easy, takin...