As a result of the pre-financing of the rising number of EU-funded projects, interest payments and housing subsidies, the central sub sector of the state budget accumulated a deficit of HUF 911.2bn in the first half of the year. The deficit is line with prior projections, and the ESA deficit target of 2.4 percent is set to be attained by year-end.

Within the above figure, the central budget and Social Security Funds closed the month with deficits of HUF 902.4bn and HUF 110.5bn, respectively, while Extra-Budgetary State Funds posted a surplus of HUF 101.7bn.  In the corresponding period of the previous year, the central sub sector of the state budget had a deficit of HUF 402.1bn. In the month of June 2017, the sector’s deficit was HUF 697.9bn.

Three main factors must be noted in the analysis of the observed period. This year, domestic payments aimed to pre-finance EU-funded projects increased substantially, to total HUF 1046.2bn. As the amount disbursed for the same purpose in the corresponding period of the previous year was HUF 467.4bn, the current higher amount shows that development policy objectives are set to be achieved this year. It must be added though that incoming EU funds are still markedly below the amount of EU project-related expenditures. Compared to last year, housing subsidies have soared, and this signals the success of the Government’s housing policy. In the case of interest payments, in June they became due at bonds with various maturities.

On the revenue side, those related to employment (personal income tax and payroll taxes) were higher than projected. As the flat-rate tax of small enterprises (KATA) is gaining popularity, revenues were also higher from this levy.

Thanks to the Government’s employment policy measures, more and more people have a job and real wages are on the rise, and thus the disposable income of households is also increasing. This drives consumption and savings growth, which two factors signal that the standard of living has been improving in Hungary.

(Ministry for National Economy)