By Nick Mann | 10 January 2013

Hungary is set to meet the deficit target it agreed with the European Union last year, the country’s ministry for national economy said this week.

Preliminary 2012 figures published by the ministry reveal that the central government cash flow deficit for the year totalled 607.5bn forints (€2.1bn), equivalent to 2.1% of gross domestic product.  This is below the 671.9bn forint (€2.3bn) target set by the government. It is also less than half the 1,741.6bn (€6bn) forint deficit recorded in 2011.

This ‘serves as a proper basis for achieving the projected 2.7% deficit target calculated by EU methodology’, the ministry said in a statement. Official data will be published at the end of March and sent to the EU, it added.

Achieving the target would increase Hungarian hopes of exiting the EU’s Excessive Deficit Procedure, under which EU member states are expected to keep their budget deficit below 3% of GDP. Last year, the European Commission froze €495m of aid scheduled for Hungary because of the country’s ‘failure’ to keep within the 3% deficit limit in 2011.

Hungary had originally hoped to achieve a deficit of 2.5% of GDP in 2012, but this target was revised up to 2.7% in October, when the ministry also revised up its deficit target for 2013 from 2.2% of GDP to 2.7%.

As part of its plans to meet these goals, the Hungarian government unveiled two separate austerity packages in quick succession in October that together included around 897bn forints worth of deficit reduction measures.

Just before Christmas, ratings agency Fitch revised its outlook on Hungary’s BB+ credit rating from negative to stable. The agency said it was confident the country would achieve its deficit targets for 2012 and 2013 and also keep its deficit below 3% of GDP in 2014, taking additional consolidation measures if necessary.