Hungary has yesterday revised its 2006 annual budget deficit goal to 9.4% of GDP from 6.1% planned earlier. The Prime Minister has announced in the Parliament yesterday, this year’s budget deficit will see an overflow of HUF 1,000bn (equally split between one-offs and regular items), out of which the Government targets to trim HUF 350bn this year to make the actual overflow to come at HUF 650bn. According to Magyar Hírlap sources, the increase of the middle bracket VAT could result in HUF 66bn savings this year. Additionally, lower subsidies for public transport can be among the measures to be implemented in the remainder of this year.
The PM also stressed, they intend to propose a stabilization package on Saturday which will target to save further HUF 1,000bn from the 2007 annual budget. As earlier stated, he confirmed: half of the targeted budget savings should arrive from increasing revenues and the other half from lowering spendings. Again, press speculates here that potential measures could include increasing corporate tax, personal income tax for high wealth individuals, lowering drug subsidies, closing tax loopholes for small enterprises.
The market is optimistic about the size of the budget savings proposed, although the detailed measures are expected to capture the reaction of the ratings agencies, local monetary policy makers and analysts next week to be followed closely.