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Hungary Sees Year-End Surplus Reducing Budget Gap to Target

May 5 (Bloomberg) -- Hungary is counting on a budget surplus in the second half of the year to narrow the shortfall to its target, the Economy Ministry said after reporting the first monthly surplus this year.

The surplus was 75.9 billion forint ($419 million) in April, narrowing the four-month deficit to 666.2 billion forint, or 96.9 percent of the annual target, the Economy Ministry said in an e-mailed statement today.

Hungary wants to reduce the gap to 2.94 percent of gross domestic product this year from 4.3 percent last year after missing the European Union ceiling of 3 percent every year since it joined the bloc in 2004.

The deficit may total 468.5 billion forint in the second quarter, followed by surpluses of 220.6 billion forint in the third and 302.6 billion forint in the fourth, the ministry said. The deficit may peak at 176.1 percent of the annual target in the second quarter after surging to 108 percent in the first three months, according to the forecast.

The forecasts for this year don’t include the consolidation of debt at the state railway company MAV and the Budapest transport company BKV, nor spending on buying out public-private partnership projects, the ministry said.

The budget will record 528 billion forint in revenue from the funneling of private pension portfolios to the state in the second half of the year, the ministry said. The government has said it will actually post a surplus of 2 percent this year, when accounting for all pension fund portfolios that are shifting to the budget.

As soon as the money arrives to the Treasury, about 1.5 trillion forint will be used to immediately cancel government bonds to cut the debt level, the highest among the EU’s eastern members, Debt Management Agency Deputy Chief Executive Officer Laszlo Buzas said on Feb. 22.

To contact the reporter on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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