Hungary Sees EU Budget Process Exit as 2012 Gap Narrows

Hungary’s government expects to exit European Union monitoring for budget offenders this year after the bloc confirmed the 2012 gap was less than projected.

Hungary’s deficit was 1.9 percent of economic output last year, according to data published by Eurostat today, better than the 2.1 percent calculated by the Hungarian statistics office. The EU data reinforce claims that the country “must” exit the excessive-deficit procedure, the Economy Ministry said in an e- mailed statement from Budapest today.

Prime Minister Viktor Orban deployed self-styled unorthodox measures, sacrificing growth, to keep the budget shortfall below the EU limit of 3 percent of gross domestic product and remove the threat of cuts in the bloc’s funding. The country doesn’t need further measures to meet its deficit target of 2.7 percent this year, Economy Minister Mihaly Varga said on April 16.

The forint weakened a fourth day against the euro, its longest slide since January, amid expectations the central bank will cut record-low interest rates further tomorrow. The currency depreciated 0.3 percent to 299.32 per euro by 2:51 p.m. in Budapest.

The expected widening of the 2013 deficit can be regarded as “fiscal loosening” to aid expansion, Gabor Orban, state secretary at the Economy Ministry, said at a parliamentary committee hearing today. The government is focusing on budget discipline and balanced growth rather than on a timetable for adopting the euro, Orban said.

Sustainable Path

Hungary’s on a sustainable fiscal path and the government will keep the budget shortfall within the EU’s limit this year and next, Varga said on April 16. The European Commission sees Hungary’s deficit widening to 3.4 percent in 2013 and 2014.

Losses in tax revenue stemming from weaker growth and lower inflation will be offset by more restrained spending at local councils and a decline in debt-interest payments, according to Varga.

The government last week cut its 2013 economic-growth forecast to 0.7 percent from 0.9 percent and predicts inflation will average 3.1 percent compared with 5.2 percent earlier.

EU funds finance 95 percent of all development projects in the country, the highest proportion in the bloc, according to the government.

To contact the reporter on this story: Edith Balazs in Budapest at ebalazs1@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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