The Ministry of Finance submitted the bill regarding the implementation of the 2018 budget (discharge bill) to Parliament today. According to the document, the Hungarian economy performed above the EU’s average level, the deficit of state finances calculated according to EU methodology was better than planned, and the sovereign debt level to GDP was lower than predicted.

The discharge bill outlines a positive scenario: Last year – reaching the third highest growth in the EU – the GDP increased by 5.1 per cent, while the deficit of state finances calculated according to EU methodology was lower than originally planned, closing at 2.3 per cent. The sovereign debt level to GDP fell from above 80 per cent in 2011 to an even lower level than presumed earlier, to 70.2 per cent.

The main goals of Hungarian sovereign debt management are the reduction of the debt rate, and the attainment of an increase in the portfolio of retail government securities, combined with a reduction in the percentage of the foreign currency debt rate. In harmony with this, the foreign currency debt rate decreased from 52 per cent in 2011 to 23 per cent, while the percentage of foreign debt holding fell from 65 per cent to 36 per cent. This improvement, which is also exemplary in the EU, contributed to the reduction of the country’s foreign currency exposure and external vulnerability, which was also recognised by international credit rating institutions in their February decisions. In the wake of the positive value judgements of market investors, both Standard & Poor’s and Fitch Ratings upgraded Hungary by one category to BBB.

Despite the fact that in 2018 tax reductions left some HUF 290 billion with families with children, members of the public and businesses, state revenues derived from the four most important taxes (corporation tax, personal income tax, VAT and excise duty) exceeded the original plans by some HUF 195 billion. The four major taxes generated a total revenue of HUF 7,598.4 billion for the budget.

Compared with the original estimate, the most significant difference emerged in Value Added Tax (VAT), despite the fact that in 2018 VAT on fish, pork offal, Internet services, restaurant services, Braille displays and printers decreased to 5 per cent. The whitening of the economy played a prominent role in the increase in VAT revenues. From 1 July last year, there was one further addition to online measures serving to whiten the economy, the online invoice, thanks to which in 2018, based on the EU’s preliminary estimates, in Hungary the rate of tax evasion decreased from 21 per cent in 2013 to 9 per cent.

(Ministry of Finance)