Hungary’s budget deficit fell to 0.4% of economic output in the first nine months of 2015, statistics office KSH reported as it released preliminary estimates on January 5.

The reading represents the smallest nine-month deficit the country has reported since 2000. It puts Budapest well on track to meet its full-year target to cut the deficit to 2.4% of GDP. Hungary recorded a budget gap of 2.5% in 2014.

The deficit stood at 2.7% in the first three quarters of 2014. In nominal terms, the deficit shrank to HUF109.7bn (€348mn) in January-September 2015 from HUF657.7bn a year previously. Budget revenues increased by 7.2% y/y to HUF11.7tn across the first nine months of the year, while expenditures moved up 2.1% to HUF11.8tn.

The general government sector ended the third quarter of 2015 with a budget surplus of 0.5% of GDP, the same as in the second quarter. The budget balance produced a deficit of 2.3% of GDP in the first three months of 2015.

The quashing of the accrued deficit comes in spite of a huge gap in the cash-flow based budget recorded throughout the year. That is due to Budapest's push this year to absorb as many EU funds as possible, with 2015 the final chance to claim financing under Brussels' 2007-13 budgetary window.

"In 2015 there was an extraordinally huge difference between the cash-flow based and accruals-based balance becouse of the special methods of accounting EU funds," Gergely Suppan at Takarekbank notes to bne IntelliNews. "Since EU financed subsidies are prefinanced by the government it increases the cash-flow based deficit before they are eventually received by the government. However, it creates receivables against the EU which can be accounted on the revenue side. The total sum [in 2015 equals] or even exceeds HUF 700bn, which can explain the large part of the difference."