Hungary’s cash flow-based general government deficit reached HUF4.6 trillion (€12.3bn) at the end of December, which is HUF400bn (€1.06bn) above the revised target and HUF2.2 trillion above the initial targets in the 2023 budget law, but slightly below the 2022 figure.

In terms of GDP, this means that the deficit has dropped from 6.2% in 2022 to 5.9%. The 2023 budget law initially projected a 3.5% shortfall, which was revised to 5.2% in October.

The budget shortfall rose by HUF520bn in December, according to preliminary figures by the finance ministry.

Revenue from taxes and contributions was up 15.2% from the base period.

Expenditures related to the regulated utilities price scheme for households had come to HUF1.37 trillion for the full year, close to double the HUF700bn in 2022, and public transport subsidies rose 20% to HUF745bn. Spending on European Union-funded programmes came to HUF2.8 trillion for the full year, while transfers from Brussels reached just HUF2.2 trillion

The ministry blamed the war, and the EU’s sanctions risks in the global economic environment, for the runaway deficit but also one-off expenditures, such as those for the acquisition of Vodafone Hungary and stakes in the Magyar Posta insurance businesses.

At the same time, the government has also parted with state-owned assets and raised over €700mn to finance the purchase of Liszt Ferenc International operator Budapest Airport, the ministry said in a statement.

The state parted with its 15% stake in Erste Bank Hungary and a 25% stake in mobile operator Yettel Magyarorszag, while reducing its holdings in the local businesses of Vienna Insurance Group from 45% to 10%.

The government's "most important goal" this year is the recovery of economic growth and the further reduction of deficit and state debt levels, the ministry said in a statement.

The continuous revision of the budget and the overshoot of the deficit targets raises serious doubts over the credibility of the government’s commitment, analysts said, who warn that bringing down the deficit to below 3% as set out in the budget act will require large-scale adjustments.

Hungary’s debt service costs are expected to edge 0.2pp higher to 4.5% of GDP this year's budget, the largest among EU members, exceeding that of Greece and Italy with a significantly higher per GDP debt.

Given the unfavourable budgetary and economic trends, the 2024 budget targets will need to be revised. Hungary’s economy is set to contract by 0.4% this year and the government has already revised the 2024 growth outlook from 4% to 3.6% in the medium-term Convergence Programme, but not in the budget.

Hungary's Fiscal Council has warned of significant risks surrounding the 2024 budget, as revenue projections due to the base effects could be missed. The advisory board noted that Hungary needs to run a primary surplus of 1.2% to meet the 2024 targets.

Detailed figures on the breakdown of revenues and expenditures will be released later this month.