Orban Boosts Hungary’s Budget Deficit, Sidelining Parliament

Veronika Gulyas
·2 min read
84
  • Oops!
    Something went wrong.
    Please try again later.

(Bloomberg) -- Hungarian Prime Minister Viktor Orban issued an executive decree that overhauled the country’s 2023 budget, enlarging the shortfall and sidelining parliament, which traditionally approves the fiscal plan.

Most Read from Bloomberg

The deficit will rise to 3.4 trillion forint ($9 billion) from 2.4 trillion forint in the original budget parliament approved in June, according to a decree published late Thursday. The government has said that will widen the budget gap to 3.9% of gross domestic product, from an initial target of 3.5%.

Revenue and spending will also rise, boosted in part by the European Union’s highest inflation rate, which the central bank expects may rise to as high as an annual 27% in December.

The EU this month effectively suspended almost €28 billion ($30 billion) in funds earmarked for Hungary due to concerns about corruption and the erosion of the rule of law. That exacerbated fiscal pressures from soaring costs of energy imports and government utility subsidies in the wake of Russia’s war against Ukraine.

Orban’s cabinet has responded by plugging budget holes with sweeping windfall taxes including on energy utilities and banks. Last week, it unveiled such a levy on pharmaceutical producers as well.

The government also plans to sell as much as $4 billion of bonds on international debt markets in the first half of next year.

The revenue will in part be used to fund utility subsidies, the cost of which will almost quadruple to 2.6 trillion forint compared with the original budget.

The government still plans to submit the budget to parliament next month for approval, Cabinet Minister Gergely Gulyas told MTI state news service on Wednesday, though that will be after the fiscal plan takes effect.

The amended budget is unlikely to face opposition in the legislature, where Orban’s lawmakers wield a two-thirds majority.

(Updates with inflation estimate in third paragraph. An earlier version of the story corrected the budget gap in the second paragraph.)

Most Read from Bloomberg Businessweek

©2023 Bloomberg L.P.