Hungary Predicts 10-Month Budget Gap at 4.6% of GDP

Hungary's government, struggling to cut the European Union's widest budget deficit, said it expects the shortfall to reach 4.6 percent of gross domestic product at the end of the month.

The deficit will be 32 billion forint ($182 million) in October alone, driven by an early payment of November wages, Deputy Finance Minister Miklos Tatrai said at a press conference today. He maintained the projection of an annual deficit at 6.4 percent of GDP, after last year's gap of 9.2 percent of GDP.

Prime Minister Ferenc Gyurcsany has cut public jobs, raised taxes and slashed subsidies to reduce the deficit from a record last year. The EU has said Hungary may be able to meet its budget goal this year for the first time since 2001.

``Revenue is coming in as planned, with slightly more than expected from value-added tax and the corporate income tax, while spending has somewhat underperformed projections,'' Tatrai said today.

The forint traded at 250.57 per euro at 10:24 a.m. in Budapest, from 250.74 late yesterday.

Without the early payment of November wages and family support, made necessary because of the schedule of national holidays, the October budget would end in a 25 billion-forint surplus, he added.

The government wants to cut the shortfall to 4.1 percent of gross domestic product next year, according to the 2008 budget draft being debated by parliament. Hungary wants to lower the gap to less than 3 percent by 2009.

The government may next week decide to drop an earlier plan to tax banks' and insurance companies' unused reserves from next year, though no decision has been made yet, Tatrai said. The tax would add about 30 billion forint to revenue.