National Bank uncovers “massive” hole in 2012 budget

In view of the January-June fiscal data, Hungary’s government may considerably overshoo its 2012 budget deficit target, but by cancelling (not using) its central free reserves it can keep the shortfall below 3% of GDP expected by the European Union, the central bank said in a report for the Fiscal Council on Thursday. NBH staff believe the budget gap will be larger than expected because the macroeconomic path will be worse then expected and that will lead to smaller tax revenues, and also because control on the spending side was loosened up as certain targets proved overly stringent. But the 2012 budget may be helped by a better-than-expected balance at local governments and that smaller EU funds will be drawn than previously envisaged so the budget’s contribution will be smaller too.