"Hungary has on Wednesday froze HUF 99 billion earmarked for 2010 as stability reserve.Under the decision, the government may tap the stability reserves only if 102% of the budget revenue targets are reached - which is virtually impossible.
The need to freeze the reserves was created by the Constitutional Court scrapping the tax on residential property that caused a shortfall of about HUF 49 bn, and there are also risks that some tax revenues will come in short of the previously set goals.
The risk from now on is that general reserves and the reserves created for interest risks will prove to be smaller than necessary, which would force the government to raise its actual budget deficit target.
While the cabinet, supported by international organisations (IMF) and the EU, has not made that move just yet, the tensions in this respect are becoming ever more prominent.
The deficit consensus of analysts in a recent Reuters poll was already above the official target (including one-offs). Concorde Securities also expects the gap to be 4.5-4.7% of GDP this year due to smaller-than-expected revenues and larger-than-expected spending. Plus there are one-offs, e.g. the debts of state-owned enterprises, that could result in an even larger shortfall."
Source: Portfolio Online Financial Journal
19.02.2010