Page 50 - CE Outlook Regions 2024
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keeping the deficit below the Maastricht threshold would require a primary surplus, which has not happened since the Orban government took power in 2010. The acquisition of Budapest Airport could further deteriorate the fiscal balance next year.
Local analysts say the 2024 budget gap will come close to 5% as both the 2023 and 2024 growth forecasts seem overestimated, hence revenue targets are overly bullish. Due to the base effect, proceeds from VAT in 2024 could miss the government’s projections by HUF 1.1-1.2 trillion, or 1.5pp, and debt service costs are set to rise to 4.5% of GDP in 2024, putting further strain on Hungary’s public finances.
Hungarian retail clients subscribed to a record amount of inflation-linked government bonds at the end of 2023, before the debt manager AKK took the product out of the market due to its burdens on the budget. Analysts estimate the debt burden from the popular 2033/I with a 0.25% yield over the projected 17-18% annual average inflation will be around HUF1.1 trillion. The share of retail debt within the total, 22% at present, could remain in the 20-25% range in 2024, Finance Minister Mihaly Varga estimated.
AKK targets outstanding FX debt within the total to remain below the 30% threshold in 2024 (from 50% in 2010) even with new issuances. This includes a possible dollar bond issue of up to $2bn and a benchmark-sized, €1bn green euro bond in case of favourable market conditions in H1.
Rating agencies Fitch and S&P affirmed Hungary’s rating in the last scheduled review of the year, citing strong structural indicators, investment-fuelled economic growth, and solid net FDI inflows, falling inflation, and a marked reduction in the current account deficit.
In its latest scheduled revision on December 15, Fitch affirmed Hungary's 'BBB' sovereign rating. The rating agency put Hungary's general government deficit for 2023 at 5.6% and said that raising the 2023 deficit target challenges meeting next year’s 2.9% target.
4.4 Budget and debt - Slovakia
The country’s budget deficit soared by €7.68bn in 2023 or by 69.6% y/y. The state income was €23.69bn, or by 24.5% more y/y but by 11.3% less than in the approved budget for 2023. Expenses reached €31.36bn, which is a 33.2% increase y/y and a 10/5% drop in comparison to the approved budget. The country’s general government budget deficit is forecast to be around 6.5% of GDP, up from 2% in
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