While the priority of fiscal stability is maintained, the state budget provides funding for the financing of several development and social policy objectives. In February 2018, the disbursement of funds as advance payment for the financing of EU-backed and Modern Cities projects has continued. As a result, the central sub sector of the state budget closed the first two months of 2018 with a deficit of HUF 526.6bn.

Within that, the central budget accumulated a deficit of HUF 599.5bn, while Social Security Funds and Extra-Budgetary State Funds posted surpluses of HUF 52.8bn and HUF 20.1bn, respectively. Expenditures related to EU-funded projects totalled HUF 492.0bn so far this year while they were HUF 153.3bn in the corresponding period of 2017.

The amount of revenues received from EU funds this year until the end of February 2018 was only HUF 17.9bn. In addition, since 1 January 2018 the tax authority has only 30 days – instead of the former 45 days – to transfer VAT refunds requested by taxpayers. This has caused expenditures to rise by HUF 200bn compared to the same period of last year.

In comparison to January-February 2017, tax revenues have risen sharply: personal income tax revenues were up by 17 percent despite the fact that Hungary has one of the EU’s lowest personal income tax rates of 15 percent. Higher tax revenues are attributable to favourable macro-economic processes and the implementation of various Government measures. It was in the month of February when employees first received higher salaries resulting from the six-year wage agreement and public sector wage hikes. As a consequence of the wage agreement, Hungarian families have earned more, which has been fuelling consumption, and lower payroll taxes coupled with investment incentives have boosted the competitiveness of the economy.

The Government continues to expect GDP growth of above 4 percent and a general government deficit of 2.4 percent of GDP for the year 2018.

(Ministry for National Economy)