Page 63 - CE Outlook Regions 2023

Fast growing current spending and a downward revision of growth
potential could make it difficult to arrest the upward debt trajectory for
the Baltics in 2023.

Significantly higher government debt/GDP reflecting persistently loose
fiscal policy could also lead to negative rating actions by international
lenders.

Estonia’s state revenues were set at €15.58 billion for 2023, while
expenses will total €16.81 billion.

Investments will total close to €775 million, a rise of around €30 million
on this year's figure.

The structural budget deficit will remain at 2.6% in 2023.

Estonia entered the pandemic with one of the lowest general government
debt ratios across Fitch-rated sovereigns, at just 8.6% of GDP in 2019.
But now the ratings agency projects the debt/GDP ratio to reach 28.4%
by 2024.

Ratings agency Standard and Poor's (S&P) affirmed Estonia's rating at
the recent 'AA-' level at the end of 2022, but changed the outlook from
positive to negative. However, Estonia's credit could be affected by
economic, financial or foreign effects associated with the war and the
threat of recession could be more lasting, S&P said. It is expected that
the agency will change the outlook of Lithuania and Latvia from positive
to negative too.

4.3 Budget and debt - Hungary

The government slapped windfall taxes on the banking, insurance,
energy, retail, telecommunications, airline, pharmaceutical and
advertising industries to fill the gaping hole in the budget, which widened
to 85% of the full-year target.

Extra profit taxes are set to generate HUF800bn in 2022 and HUF 1
trillion in 2023. Some HUF2 trillion of state investments were
suspended. As energy prices went through the roof, pushing Hungary’s
trade deficit to a new record, the cabinet was forced to overhaul the
energy subsidy scheme, a cornerstone of Fidesz’s election promises.

The restrictive fiscal measures are aimed at keeping the deficit target at
4.9% in 2022. In the following years, fiscal policy will continue to be
restrictive as the temporary measures are phased out. Nonetheless, the
public deficit will decline only gradually as the economy slows.

63 CE Outlook 2023 www.intellinews.com