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Hungarian Budget Cuts Deficit by Sven R. Larson

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Hungarian Budget Cuts Deficit

The Hungarian parliament has adopted a budget that, according to the Budapest Business Journal (BBJ), will run a deficit of 3.5% of gross domestic product, GDP, in 2023. Eurostat numbers indicate that in 2020, during the pandemic, the deficit reached 7.8% of GDP, followed by 6.8% in 2021.

A deficit of 3.5% of GDP would bring the deficit closer to its 2.1% average from 2015-2019. 

The BBJ reports two main targets in the budget:

Presenting the bill to lawmakers six weeks earlier, Finance Minister Mihály Varga said the “clear goal” of the 2023 budget was to protect the regulated utilities price scheme for households and strengthen the country’s military defense. 

The utilities fund, BBJ explains, 

will get HUF 242.3 bln in revenue from a windfall tax on the energy sector, HUF 240 bln from mining royalties, HUF 30 bln from an extraordinary contribution by airlines, and HUF 96.4 bln from a sectoral tax on telecommunications companies. 

Meanwhile, Reuters reported:

The government has imposed big windfall taxes on banks and a raft of companies, launched spending cuts, and last week scrapped a years-long cap on utility prices for higher-usage households, which—along with tax changes for entrepreneurs—triggered protests against Orban.

Reuters provides no source for its reporting. 

The second main target of the Hungarian parliament’s adopted budget, BBJ reports, is to strengthen military defense. The defense account in the budget has been upgraded with an extra HUF 841 billion for 2023.

Upon passing the budget, parliament relied on a forecast of inflation at 5.2%, the same rate that Eurostat recorded for Hungary in 2021. The budget also depended on a forecasted 4.1% real GDP growth for 2023. This figure is close to the 4.05% GDP growth average for 2015-2019, the last five years before the pandemic.

Sven R. Larson is a political economist and author. He received a Ph.D. in Economics from Roskilde University, Denmark. Originally from Sweden, he lives in America where for the past 16 years he has worked in politics and public policy. He has written several books, including Democracy or Socialism: The Fateful Question for America in 2024.