However, it is still undecided whether the submission will occur alongside modifications to this year's budget. János Lázár, in particular, may find little joy in the rewritten budget as the initiation of several major investments is likely to face further delays.

Despite the challenges, the government refuses to abandon its pursuit of early budget approval. Consequently, it plans to present the budget for the year 2025 to the National Assembly in the weeks following Easter, Világgazdaság has learned. Not only is the 2025 budget on its way to Parliament, but so is the amendment for this year's budget, especially since the previously outlined macro path was virtually overturned by March. An extraordinary situation may arise where the National Assembly has to discuss both bills simultaneously.

THE BUDGET COUNCIL'S WARNING TO THE GOVERNMENT LAST YEAR

Last year, the Budget Council warned the government that weaker than expected growth would significantly impact tax revenues, greatly influencing the outcome for 2024. The Council's concerns were validated as the deficit target had to be adjusted multiple times last year: firstly in September from 3.9% to 5.2%, and then in the final days of December to 5.9%, with Márton Nagy, the Minister of National Economy, eventually admitting in an interview that the actual deficit reached 6.5%. Given these developments, it was almost certain that this year's budget would need adjustments, especially considering that by February, 1,758 billion forints of the planned 2,514 billion forint deficit for the entire year had already been accumulated, fulfilling 69% of the target.

The government now aims for a 3.7% deficit for next year, following this year's adjusted 4.5%, indicating an ongoing deviation from the Maastricht criteria.

This could also mean that the decrease in state debt might be slower than anticipated.

GOVERNMENT COMMITTED TO REDUCING BUDGET DEFICIT AND STATE DEBT

In response to Világgazdaság's inquiry, the Ministry of Finance confirmed that modifications to this year's budget and planning for next year's budget are currently underway. The government is dedicated to reducing the budget deficit and state debt to ensure sustainability by gradually reducing the deficit, the department wrote.

Mihály Varga, the Minister of Finance, announced at the Hungarian Chamber of Commerce and Industry's economic opening this year that a three-year program has been developed to restore fiscal balance, thus the strict fiscal rules might be adhered to by 2026, possibly bringing the deficit under 3% again for the first time since 2019. This situation is unlikely to cause financing problems for the country, especially after international credit rating agencies reaffirmed Hungary's debtor classification last year, unanimously forecasting this 4.5% deficit.

The greater mystery remains with Brussels, where the rules of the Stability and Growth Pact, suspended during the coronavirus pandemic in 2020, are expected to be reinstated this year. However, the government may be in luck, as high deficits appear to be a widespread issue, not unique to Hungary. Additionally, the war and green transition are imposing extra expenditures on member states' budgets, which makes a more lenient Commission seem likely. The new rules might exclude defense spending from the deficit calculations, which is crucial as it could otherwise lead to the initiation of excessive deficit procedures against Hungary, potentially resulting in the suspension of EU funds.

LOWER GROWTH AND HIGHER INTEREST RATES: MAJOR CONCERNS

The root cause of the higher interest rate trajectory is weak economic growth. The Hungarian economy spent the last year in a 0.7% recession instead of the 1.5% GDP growth, creating a 1,000 billion forint gap in VAT revenues.

Though the Ministry of National Economy had long been hopeful of an optimistic outcome, the weak end-of-year trade and industrial data, along with fourth-quarter GDP figures, led Márton Nagy to acknowledge that a 4% economic growth target was unrealistic.

The government is currently discussing growth between 2% and 3%, with precise figures expected to emerge from the budget amendment.

Even the central bank has not provided a more precise estimate for this year; its most recent inflation report in March outlined the same range. The exact growth rate is crucial, as seen last year, the lack of domestic demand and consumption poses the most significant risk to the budget, which relies on consumption type taxes over labor taxes, making the state treasury immediately feel the lack of VAT revenues.

Another issue is the high interest rates, planned at 3,144 billion forints in this year's budget by the Ministry of Finance. However, the department missed the mark last year: instead of the original 2,541 billion forints, spending stopped at 2,764 billion forints, 200 billion more than planned – a scenario likely to repeat itself this year.

INVESTMENT DELAYS POSSIBLE

Not only does the government need to adjust this year's budget on the revenue side, but also on the expenditure side, a situation likely unwelcomed by János Lázár, the Minister of Construction and Transport, who hinted at the commencement of multiple significant investments this year. It remains uncertain what will become of projects like the Mohács Danube Bridge, which was supposed to start this spring, and the M76 expressway, touted as the most expensive automotive investment ever. Márton Nagy did not specify in his latest press conference, but indicated that some investments and orders might be delayed. However, he emphasized that there's no discussion of cancellations.