Hungary faces serious budget crisis: EUR 2.62 billion shortfall
Hungary’s Budget Faces Serious Trouble Due to Lower-than-expected VAT Income
Hungary is currently facing budget issues, despite the government’s efforts to reduce development expenditures in response to a lack of EU funds. The primary reason for this financial struggle is the lower-than-expected VAT income, which comes after the country experienced the highest inflation within the EU.
According to Forbes, the government had initially calculated a HUF 8 thousand billion VAT income for 2023. However, by the end of November, only 77.3% of that sum had been received. This means that there is an almost HUF 1 thousand billion (EUR 2.62 billion) shortfall compared to the expected amount.
As a result, even though the government has cut back on spending for EU development programs, the budget still faces a significant deficit. In an effort to address this issue, state-owned companies are attempting to contribute to plugging the financial hole. In November alone, their contribution was HUF 334 billion, as compared to just HUF 33 billion in November 2022.
The cash-flow-based budget deficit for Hungary stood at 4,074.3 billion forints (EUR 10.7 billion) at the end of November, as confirmed by the Finance Ministry. The central budget had a deficit of 3,824.9 billion forints, and the social security funds were in the red by 421.3 billion forints. Additionally, separate state funds had a surplus of 171.9 billion forints.
The ministry cited the war in Ukraine, the energy crisis resulting from sanctions, and the high-risk global economic environment as factors putting significant pressure on the budget. Despite these challenges, the ministry emphasized that the budget is committed to maintaining the value of pensions, family subsidies, and regulated utility prices.
Furthermore, the government is making efforts to reduce the deficit and public debt, despite facing extraordinary expenditures. Revenue from taxes and contributions has increased by 15.9 percent from the base period, according to the ministry.
In another aspect of Hungary’s financial situation, the country’s trade surplus narrowed to EUR 1.003 billion in October, according to the Central Statistical Office. This represented a decrease from the previous month, with exports rising by 1.1 percent and imports dropping by 13.2 percent.
As Hungary continues to address its budget deficit and trade challenges, it remains to be seen how the government will navigate the complex economic environment and work towards financial stability.
