Hungary’s cash-flow based budget produced a deficit of HUF144.9bn (€460.54mn) in the first four months of the year, the economy ministry confirmed on May 19. The report backs up an earlier preliminary estimate issued on May 9.

The shortfall is the lowest recorded at the end of April in 15 years. The gap stood at HUF609.9bn in April 2015. The ministry notes that the improvement is mainly due to higher tax revenue and a decrease in expenditures related to EU programmes and interest payments.

However, how long that trend will last is questionable. The government has recently said it will raise spending this year, putting the 2% of GDP target at risk.

Setting the scene for the strong start to 2016, however, January produced a record high surplus for the month of HU92.2bn. A turnaround was registered in February, which produced a HUF77.4bn deficit, while March saw the gap increase to HUF140.8bn.

April produced a deficit of just HUF19.1bn. That leaves the cash flow government deficit at HUF144.9bn at the end of the first four months of the year, 19% of the HUF761.6bn target for the full year.

“The deficit target for 2% of GDP in 2016 remains realistic and achievable,” the economy ministry said in a statement, insisting the recent proposed modifications of the budget will not put the target at risk.

At the end of April, the Hungarian government announced that it will allocate an additional HUF500bn in spending, as the "favourable economic processes suggest that budget revenues will be significantly larger than previously expected," Portfolio.hu reports.

The 2017 budget bill targets an expanded deficit of 2.4% of GDP, reflecting the government's plan to concentrate on supporting growth rather than continue fiscal consolidation. Eyes are clearly already on the 2018 election.

However, the fiscal stimulus planned for 2017, together with "the transparency concerns related to spending of central bank foundations, and the disappointing Q1 growth” reduce the chances that Hungary will receive a long-awaited rating upgrade from Fitch on May 20, Eszter Gargyan at Citibank told bne IntelliNews.