Hungary’s Government Faces Financial Failures in 2023
The Hungarian government’s financial forecast for 2023 has fallen short, with the budget deficit projected to be 5.9% of GDP, 2 percentage points higher than the initial target. Additionally, the economy is anticipated to contract by 0.4% not only for this year but also in the following years, indicating a slower-than-expected recovery.
In adherence to the Public Finance Act, the government unveiled its primary budgetary and macroeconomic figures for the next three years by 31 December. The latest official medium-term macroeconomic and budgetary forecasts for 2023 were released on the evening of 30 December, raising questions about the timing of such crucial forecasts.
Looking ahead to 2024, the new macroeconomic outlook predicts a more modest economic growth for Hungary, with GDP growth projected at 3.6% and inflation forecasted at 5.2%. The government also envisions average inflation remaining above 3% in 2025, contradicting previous forecasts predicting a return to the 3% target by that time.
The Ministry of Finance’s document reveals the government’s revised expectation, indicating a higher-than-expected budget deficit of 5.9% of GDP in 2023, exceeding the raised target of 5.2% set in October. The reasons behind this budget shortfall are attributed to lower-than-expected revenues from companies, consumption-related revenues, payments from the general public, and revenue from the EU.
Despite the elevated deficit, practical consequences are unlikely in 2023, given the absence of a major global crisis and secured financing. However, Hungary bears a significant cost in interest expenditure.
It is evident that the Hungarian government needs to address the factors contributing to the budget shortfall and take appropriate measures to ensure a more accurate financial forecast in the coming years.
