The high inflation did not help the public debt much either: despite the fact that the nominal GDP (the denominator of the debt ratio) was inflated by the rapid rise in prices, the indicator fell from 75.2% to only 75% in one quarter. And in half a year, there is also a modest decrease of 0.4 percentage points. (There may be inaccuracies in the latest data, because the MNB does not yet know the nominal GDP expressed in forints, it can only estimate it based on real growth.)
With this, the public debt as a percentage of GDP is still higher than at the end of 2022, which means that some effort may be needed in the last quarter in order to demonstrate a decreasing debt trajectory. At the end of last year, the debt ratio closed at 73.9%, so it must be reduced by more than 1 percentage point in the last three months of the year in order for the reduction to be realized on an annual basis.
The reason for the restrained reduction of the public debt is the economic stagnation and the large financing needs of the budget. In the last year ending with the third quarter, this financing requirement was 7.8% of GDP. With this, state management still historically shows a very significant imbalance.
Within the last one year, the second and third quarters of this year show a somewhat better picture, with a seasonally adjusted 4.7 and 4.3% public finance financing demand, which is worsened by the double-digit indicators of the previous two quarters. However, it is still highly doubtful whether this year’s (increased) deficit target of 5.2% will be met – this would require a budget position of practically zero in the last quarter.
It is also clear from the preliminary data of the financial accounts statistics that the net financing capacity of households is significant. In the last year, the indicator has stood at 6.3% of GDP. The main reason for this is that the borrowing activity of the population has fallen due to high interest rates. Joint financing by the state and households demand it is decreasing rapidly, in the last one year it is 1.6%. The last two quarters show an even better picture, when, according to seasonally adjusted data, the financing rate is already 2.5% ability. In the improvement of the external balance, the decline in the energy import bill plays the main role, but the decline in household consumption is an important factor.
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