The EU penalty: negative corrections appeared on the BOP and fiscal accounts

HUNGARY - In Brief 01 Jan 2020 by Istvan Racz

---

We wish a happy new year to all of our readers!A EUR1423 million (cca. HUF460 billion) negative correction appeared on net transfers from the EU between the preliminary and the final versions of the Q3 2019 BOP, cutting the January-September net inflow number from 3.2% of GDP to just 1.8% of GDP. This looks like a one-time write-off of Hungary's financial claims on the EU, on account of the penalty that the EU imposed on the country, and the government accepted, at some point in the autumn months of 2019. Previously, we knew of a HUF400-420 billion estimate by Portfolio.hu, an independent economic news portal, and of HUF400 billion from a statement made by cabinet minister Gulyás a few weeks ago. It seems now that the real size of the penalty was somewhat bigger those latter numbers.The external financing deficit in the BOP rose from 0.3% of GDP from the preliminary 1.3% of GDP, as regards January-September, mostly as a result of the correction made to net EU transfers.As to fiscal accounts, a similar revision of the Q3 2019 net financing data became known yesterday. In that, the January-September deficit rose from 0.4% of GDP to 0.8% of GDP, i.e. by HUF147 billion between the preliminary and the final version. This change covers only one-third of the correction in the BOP, but of course, there is no reason to believe that the only revision between preliminary and final had to do with EU transfers. At any rate, the previous two years' government financing deficits did not grow, they actually fell in both years from 2.4% of GDP to 2.3% of GDP, as a result of all revisions carried out in the final statistics for Q3 2019.At this point, the distribution of the total EU pen...