The parliament approved the budget proposal for 2017 with 122 votes in support and 63 against, local media reported. The budget targeted a budget deficit expansion to 2.4% of GDP next year, unchanged from the original government’s proposal. The deficit will come from investment expenditure while the operating budget will be balanced. The government changed the budget layout to demonstrate the balanced operating budget, showing that the deficit will come from spending on EU projects and domestic investment spending.
The 2017 budget is based on a GDP growth forecast of 3.1% and CPI inflation of 0.9%. In these conditions, government debt was expected to decline to 71.9% of GDP at end-2017, compared to expected 73.5% at end-2016. The approved 2017 budget included the VAT reduction announced earlier by the government – on milk, eggs and poultry to 5% and on restaurant and internet services to 18%. Other announced measures included the expansion of benefits for families with children, reduction of the funds for the public work programme, increased financing for household construction and wage increases in various public administration sectors.
There will be two buffers against unexpected risks in the budget – a HUF 110bn reserve for extraordinary government measures and HUF 60bn against unexpected shocks. In addition, the government will freeze a total of HUF 35bn from the line ministries’ budgets as an additional precaution. The funds will be released in Q4/2017 in case the fiscal situation allows it.
Meanwhile vicor Orban, Prime Minister of Hungary, said at the inauguration of an EIB office in Budapest that EIB should play a major role for compensating the expected EU fund reduction after 2020. Continued strong support from EU funds should not be expected as the EU funds’ future is uncertain after 2020, he pointed out. Hungary therefore has to build a financial system that is able to finance economic growth, he said and expressed hope that the EIB will consider Hungary as a priority investment destination. Orban emphasised on the political stability in the country, pointing out that every parliament had completed its mandate since the transition.
Relations between Hungary and the EIB will become even stronger with EIB’s Budapest office, economy minister Mihaly Varga said. The government appreciated the investment project support by the bank as well as its support for EU fund absorption and expert assistance. The EIB has lent EUR 19.3bn to Hungary since its started activities in Hungary, EIB President Werner Hoyer said. The opening of an office in Hungary was in line with the EIB policy to strengthen its presence EU Member States and will contribute to raising the bank’s capacity to provide technical and financial assistance, he said.