The budget deficit target in Hungary is now 4.1 percent, instead of the previous 3.7 percent, said Kornél Kisgergely, state secretary responsible for public finances. Meanwhile, the cash flow deficit target has been raised from HUF 4.1 trillion (€10 billion) to HUF 4.8 trillion, writes HVG.
Kisgergely explained to press that the increase was due to EU funds still not arriving, resulting in a lack of resources from the EU Recovery Fund, an expectation for less tax revenue than before, and more funds required for family support and hospitals.
Portfolio.hu further detailed that the Hungarian government is having to make up for a worse-than-expected macro trajectory, while also reiterating that already announced government measures, such as extending the social security exemption for mothers, are taking additional funds.
Mihály Hoffmann, CEO of the State Debt Management Center, said that nearly double the value of foreign currency bonds (HUF 1.7 trillion worth) will be issued this year instead, due to the higher deficit. When asked whether this was necessary due to the lack of EU funds, he replied: “What was said can be interpreted in this way.”
A breakdown of debt ownership was also provided: Currently, the institutional market is approximately 50 percent, the foreign currency market is 30 percent, and the retail market is 20 percent.
The current amendments also mean that the share of foreign currency debt will temporarily rise above the 30 percent benchmark value.
As noted by Portfolio, violating the foreign exchange benchmark could send a negative message to the market and credit rating agencies.
Press noted that the Hungarian government waited for its announcement until after all three major credit rating agencies had given their latest review, which were already rather gloomy.
Fitch significantly lowered its forecast for 2025 Hungarian economic growth from 2.5 percent to just 0.7 percent. Moody’s sees GDP growth of 1 percent, down from 1.9 percent; and S&P is estimating 1.5 percent growth, down from 3 percent. S&P also downgraded Hungary’s credit rating from stable to negative.
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