Hungary MOF Defends 2011, 2012 Budget Gap Targets

BUDAPEST -(Dow Jones)- The Hungarian Finance Ministry said Monday its budget deficit forecasts for the coming years are achievable, in response to comments from the Fiscal Council that questioned the targets.

"Based on the government macroeconomic path, the ministry considers its forecast for 2011 and 2012 well-grounded on both the budget deficit and external factors," the ministry said in a release late Monday.

Hungary's Fiscal Council, an independent fiscal policy monitoring body, said earlier Monday that Hungary risks overshooting its budget deficit targets for 2011 and 2012 by up to 0.7% of gross domestic product in each year.

The Finance Ministry, though, said the council's calculations are based on a more pessimistic outlook for the economy in 2011 and 2012 than its own forecasts.

"The ministry calculated risk factors that are currently foreseeable throughout the process of budgetary planning," it said, adding that the forecasts become more precise as the target period approaches, when planning for several years ahead.

The government is targeting a deficit of 2.8% of GDP in 2011 and of 2.5% of GDP in 2012, according to state news agency MTI.

The Fiscal Council said risks to the government's two deficit targets include higher-than-forecast expenditure related to the central bank's losses, and lower-than-expected revenue from consumption and personal income tax.

Hungary was hit hard by the global financial crisis because of its loose fiscal policies and high external debt. In October last year, it became the first European Union country to secure aid from the International Monetary Fund. In November, it set up the independent Fiscal Council to help maintain a credible fiscal policy and, if necessary, call attention to possible fiscal risks in the current or future budget.

 
   Ministry Web site: www.pm.gov.hu 
 

-By Veronika Gulyas, Dow Jones Newswires; +361-267-0623; veronika.gulyas@dowjones.com

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October 27, 2009 05:50 ET (09:50 GMT)


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