The National Bank said the government 2017 budget draft contains significant easing compared to previous forecasts.
The 2.4% ESA deficit targeted by the government in the 2017 budget bill amounts to considerable easing compared to the dropping deficit trend set in Hungaryʼs 2015 convergence plan or expected in the MNBʼs March Inflation Report. Some budget revenues could fall below plan in 2017 so the targeted deficit could be reached if part of the reserves in the budgetʼs Country Protection Fund – the equivalent of 0.1% of GDP or about half of the HUF 60 bln fund designed against unforeseen risks – remain unspent, the MNB concluded.
The MNBʼs projections for taxes on consumption as well as payroll taxes are under the targets in the budget bill. On the expenditure side, the central bank sees an overshoot of spending on the revamped home purchase subsidy scheme, but this could be balanced out with lower co-payments on EU development funding. The report projects preliminary allocations of EU funds of HUF 1.678 trillion, under the HUF 2.239 tln target in the budget bill.
