Hungary's government sector recorded a deficit of 4,002 billion Hungarian Forint (HUF) in 2024, representing 4.9% of its Gross Domestic Product (GDP).

This figure reflects an improvement of 1,097 billion HUF compared to the previous year, marking a nearly 1.8 percentage point reduction in GDP terms, according to preliminary data from the Hungarian Central Statistical Office (KSH).

Revenues for the government sector reached 34,203 billion HUF, while expenditures amounted to 38,206 billion HUF in 2024. Revenues increased by 2,158 billion HUF, or 6.7%, compared to 2023. Notably, social security contributions rose by 976 billion HUF, a 13.1% increase.

Revenues from production and import taxes increased by 773 billion HUF, up 5.9%, with VAT revenue growing by 452 billion HUF, or 6.4%.

Income tax revenue saw a notable rise of 599 billion HUF, an increase of 10.8%.

However, other revenues saw a decline of 194 billion HUF, which is a 3.3% decrease.

On the expenditure side, the total increased by 1,061 billion HUF, or 2.9%, from the prior year.

A significant proportion of this increase came from employee compensation, which rose by 1,090 billion HUF, representing a 14.8% increase.

Cash social benefits also increased by 713 billion HUF, or 8.8%.

The current consumption expenditure rose by 91 billion HUF, a 1.4% increase, while interest expenditures surged by 506 billion HUF, or 14.3%.

Conversely, gross fixed capital formation decreased by 488 billion HUF, a decline of 12.6%, and other government expenditures fell by 850 billion HUF, or 11.1%.

In the fourth quarter of 2024, the government sector deficit was recorded at 1,749 billion HUF, constituting 8.4% of GDP, which reflects an improvement of 382 billion HUF or a 2.5 percentage point decrease compared to the same period in 2023. During this quarter, revenues rose by 193 billion HUF, or 2.2%, while expenditures decreased by 189 billion HUF, a reduction of 1.7%.

These financial metrics have been reported following the Excessive Deficit Procedure (EDP) regulations outlined by Eurostat, the European Union's statistical office.

The government initially planned for a deficit of 2.9% of GDP for 2024, which was raised to 4.5% by April 2023 and ultimately surpassed this revised target.

For the current year, the government projects a budget deficit of 3.7%, with plans to reduce it to 2.9% by 2026.

The overall budget balance for 2023 reflected a notable decrease of 1.8 percentage points to 4.9%.

Analysts noted that this significant reduction occurred despite economic growth being less robust than expected due to weak external demand, partially mitigated by fiscal tightening measures.

As a result, the state debt ratio slightly increased to 73.5%, remaining nearly 15 percentage points lower than the eurozone average.

In 2023, overall revenue showed a 6.7% increase.

Among the categories, social security contributions grew the fastest at 13.1%, driven largely by rising wages, while personal income and property taxes rose by 10.8%.

In contrast, production and import taxes increased more modestly at 5.9%, which reflects subdued economic growth, particularly where VAT revenues saw a 6.4% rise, indicating a rebound in consumption.

Analysts assert that the decrease in the deficit was mainly due to expenditure growing at a substantially lower rate of 2.9% compared to revenues.

It was highlighted that expenditures on employee compensation surged by 14.8%, largely benefiting from public sector wage increases, particularly for teachers, while interest expenditures reached over 4,000 billion HUF, reflecting a high interest environment.

Looking ahead, forecasts suggest the continuation of a decreasing trend in GDP-related deficits throughout this year.

Recent legislative measures, including tax exemptions for families with three or more children, VAT refunds for pensioners, and an expansion of home renovation programs, might aid in achieving the projected deficit target of 3.7% in 2025. The structural deficit could further reduce to 3.4% next year, contingent on economic growth resuming and maintaining disciplined fiscal policies.