C 312/160
EN
Official Journal of the European Union
1.9.2023
(19)
The general government balance in 2023 is expected to continue to be impacted by the fiscal measures taken to mitigate the economic and social impact of the increase in energy prices.
They consist of measures extended from 2022, in particular subsidies to utility companies for the losses incurred due to caps on residential energy prices and support schemes for energy-intensive companies.
The cost of those measures continues to be partly offset by taxes on windfall profits of energy suppliers.
Taking those revenues into account, the net budgetary cost of the support measures is projected in the Commission’s 2023 spring forecast at 1,2 % of GDP in 2023 (10).
The measures in 2023 do not appear to be targeted at the most vulnerable households or firms, and most of them do not fully preserve the price signal to reduce energy demand and increase energy efficiency.
As a result, no targeted support measures are to be taken into account in the assessment of compliance with the Council Recommendation of 12 July 2022 (11).
(20)
In its Recommendation of 12 July 2022, the Council recommended that Hungary take action to ensure in 2023 that the growth of nationally financed primary current expenditure is in line with an overall neutral policy stance (12), taking into account continued temporary and targeted support to households and firms most vulnerable to energy price hikes and to people fleeing Ukraine.
Hungary should stand ready to adjust current spending to the evolving situation.
Hungary was also recommended to expand public investment for the green and digital transitions, and for energy security taking into account the REPowerEU initiative, including by making use of the Facility and other Union funds.
(21)
In 2023, the fiscal stance is projected in the Commission’s 2023 spring forecast to be contractionary (+ 4,2 % of GDP), in a context of high inflation.
This follows an expansionary fiscal stance in 2022 (‒ 0,4 % of GDP).
The growth in nationally financed primary current expenditure (net of discretionary revenue measures) in 2023 is projected to provide a contractionary contribution of 2,2 % of GDP to the fiscal stance.
Therefore, the projected growth of nationally financed primary current expenditure is in line with the Council Recommendation of 12 July 2022.
Expenditure financed by grants under the Facility and other Union funds is projected to amount to 2,3 % of GDP in 2023, while nationally financed investment is projected to provide a contractionary contribution to the fiscal stance of 0,6 percentage points (13).
Therefore, Hungary plans to finance additional investment through the Facility and other Union funds, although it is not projected to preserve nationally financed investment.
It plans to finance public investment for the green and digital transitions, and for energy security, such as development of the electricity grid, modernisation of suburban railways, support for the use of residential solar panels, provision of laptops to teachers and pupils in lower and upper secondary schools and digitalisation measures in healthcare, which are funded by the Facility and other Union funds.
(22)
According to the 2023 Convergence Programme the general government deficit is expected to decrease to 2,9 % of GDP in 2024.
The decrease in 2024 mainly reflects a significant reduction in general government spending as a share of GDP, in particular on gross fixed capital formation, intermediate consumption and compensation of employees.
According to the 2023 Convergence Programme, the general government debt-to-GDP ratio is expected to decrease to 66,7 % at the end of 2024.
On the basis of the policy measures known at the cut-off date of the forecast, the Commission’s 2023 spring forecast projects a government deficit of 4,4 % of GDP in 2024.
This is higher than the deficit projected in the 2023 Convergence Programme, mainly due to higher projected expenditure on gross fixed capital formation in line with recent trends and higher intermediate consumption driven by lingering inflationary pressures.
The Commission’s 2023 spring forecast projects a higher general government debt-to-GDP ratio, of 71,1 % at the end of 2024.
(10) The figure represents the level of annual budgetary cost of those measures, including current revenue and expenditure as well as – where relevant – capital expenditure measures.
(11) Council Recommendation of 12 July 2022 on the National Reform Programme of Hungary and delivering a Council opinion on the 2022 Convergence Programme of Hungary (OJ C 334, 1.9.2022, p. 136).
(12) Based on the Commission’s 2023 spring forecast, the medium-term (10-year average) potential output growth of Hungary, which is used to measure the fiscal stance, is estimated at 16,6 % in nominal terms.
(13) Other nationally financed capital expenditure is projected to provide a contractionary contribution of 2,2 percentage points of GDP.
The large fall in other capital expenditure in 2023 is related to the large impact of the purchase of gas stockpiles by a special entity classified as part of the general government in 2022.