Next year's fiscal deficit target lowered to 4.9% of GDP

HUNGARY - In Brief 23 Dec 2021 by Istvan Racz

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Rather than going home to decorate the Christmas tree or completing the selection of gifts for the kids, people in the Finance Ministry and up on the Castle Hill of Budapest appear to be still busy working.Yesterday's second important announcement, from the Finance Ministry, said that based on a government cabinet decision, the fiscal deficit target for 2022 has been reduced by 1%-point to 4.9% of GDP. For this to be feasible, the cabinet decided to postpone HUF755bn of fixed investment from next year to later periods. This is the same as a fiscal restriction, but the Fidesz government will never speak of a restriction, especially in an election campaign period.HUF605bn of expenditure cuts was specifically named by the related decree, by references made to various programs, so that it would be difficult to tell in most cases exactly what will not be developed as originally planned next year. The source of the rest has not been specified as yet. Instead, the cabinet decided that the Finance Minister should identify specific sources for that HUF150bn worth of expenditure cuts.Clearly, the government intends to please investors and avoid being lumped together with Turkish president Erdogan's government in the category of hopeless regimes out there at the eastern edge of the globe. This may be especially important, as fiscal policy will be extremely loose over the next few months because of the many election gifts to voters, at the same time as the MNB is making major efforts to contain inflation, and as they have just announced some government interference with private loan contracts by imposing a ban on interest rate hikes affecting household mortgages, which is pretty m...