According to financial accounts data, general government net borrowing was equal to 4.8% of GDP in the four quarters to Q4 2010, the central bank reported today. This figure is different from the 4.2-4.3% . deficit reported to Brussels, because this particular statistics already includes the reinvested earnings of the NBH. Adjusting the gap for that we would arrive at a deficit of 4.4% of GDP, which is close enough for the official number so that methodological differences could be held responsible. But there is a likelihood that the official deficit figure will come in slightly higher in the autumn. Overall, budget processes over the past two years were different from the pattern of previous election cycles. Instead of the spending spree ahead of the elections it was the global crisis and the fiscal adjustment scheme helmed by PM Gordon Bajnai that affected the budget balance the most, i.e. the government managed to rein in the deficit amidst a huge recession. Then the new cabinet carried out huge regroupings. The impact of the latter changes is hard to assess. When we take a look at the numbers, we see that the deficit decreased some in H2, as the general government financing need was around 5.5% of GDP in the first half and below 4.5% in the second half of the year, according to seasonally adjusted data. But if we also take into consideration that at the end of the year budget revenues were boosted by private pension fund contributions (which were kept by the state) and crisis taxes, then we don’t really see that the government would have taken very effective measures on the spending side in order to meet the budget deficit target.
The picture is almost as blurry with regard to the future. While the de facto nationalised private pension fund assets will create a surplus in the budget this year, we should treat it as a warning sign that while the government earlier projected a 4-6% surplus, it presently estimates it at only 2%.
While the downward adjustment is attributable mostly to one-offs, it still indicates that the budget is not exactly sound on the structural front, and that even the impeccable implementation of the structural reform plan could be insufficient to reach the 2.5% of GDP deficit goal in 2012.  Portfolio

Last Updated on Thursday, 14 April 2011 23:08