Hungary raises 2023 budget deficit target to 3.9% of GDP

It said a policy to keep a lid on some household and corporate energy bills would cost 6.5 billion euros ($6.93 billion). Prime Minister Viktor Orban's government expects economic growth to slow to 1.5% in 2023 from around 5% this year.

Hungary's government has raised its 2023 budget deficit goal to 3.9% of gross domestic product from 3.5% targeted previously due to surging energy prices and the costs of shielding some households and companies from higher utility bills. Hungary's budget deficit has ballooned this year after a spending spree ahead of April elections, and with soaring energy prices and additional gas purchases from Russia, its main supplier, contributing to expenditures.

The deficit will decline less from this year's estimated 6.1% of GDP level despite Finance Minister Mihaly Varga pledging last week to rein in the shortfall more aggressively amid an economic slowdown and higher borrowing costs. "In 2023, Hungary's energy bill will rise to 17 billion euros from 7 billion," the Finance Ministry said in a statement on Thursday. It said a policy to keep a lid on some household and corporate energy bills would cost 6.5 billion euros ($6.93 billion).

Prime Minister Viktor Orban's government expects economic growth to slow to 1.5% in 2023 from around 5% this year. The National Bank of Hungary expects growth between 0.5% and 1.5%. Economists polled by Reuters project stagnation in 2023. A 15% hike in pensions to keep track of expected inflation will lift pension expenditures to more than 6.15 trillion forints ($16.42 billion) next year, the ministry said, costing nearly as much as energy imports.

The ministry has raised the level of fiscal buffers to 255 billion forints next year from 170 billion to cover unforeseen expenditure. Orban's government announced hefty windfall taxes on banks and certain large companies in May to plug holes in the budget. Last week Orban imposed another windfall tax on drug producers based on net revenues in 2022 and 2023 with the same purpose. ($1 = 0.9376 euros) ($1 = 374.5200 forints)