Fiscal Council says 2011 budget lacks transparency

Hungary's independent Fiscal Council says the 2011 budget draft submitted to Parliament a week earlier does not show in sufficient detail how the government arrived at the main budget figures from its macroeconomic assumptions, thus significantly restricting transparency, but it projected the budget deficit would still fall.

The government's macroeconomic assumptions are not entirely in line with the main budget figures, especially in the case of public sector wage expenditures, the Council said. Central budget wage expenditures do not show the decrease that would be warranted by the macroeconomic assumptions, it explained.

The Council said the budget deficit would fall to 3.7 percent of GDP in 2010, also under the 3.8 percent government target.

It took into account revenue from crisis taxes on the banking, energy, trade and telecommunications sectors as well as income from mandatory private pension fund transfers and the assets of members of those funds who choose to join the state pension fund.

Rechanneling a part of household savings -- with the pension measures -- hurts both the transparency and the sustainability of the budget as it obscures the actual increase of the deficit, the Council said.

The Council said that reserves in the 2011 budget were down 45 percent from the original 2010 projections. The 2011 reserves will fall to the lowest level since 2006 after years of growth, it added.

The Council noted that the budget bill does not contain a consolidated balance of the central government as in the previous year.

The Council's fresh macroeconomic projections for 2011 were not as optimistic as the government's. The Council put GDP growth at 2.8 percent in 2011, under the government's 3.0 percent projection. The Council sees household consumption rising just 2.6 percent compared to the government forecast of 3.9 percent. The Council sees average annual inflation reaching 3.7 percent in 2011, while the government projects it will rise to 3.5 percent.