The Central Statistical Office (KSH) has published an inventory of more than 100 pages about the previous year. We have browsed through the sea of numbers for our readers,and besides the well-known results we found some surprising data.
According to the latest estimate of the International Monetary Fund (IMF) the global economy grew 3.3% last year – equivalent to the conjuncture registered already in 2013. The average growth rate in the Organisation for Economic Co-operation and Development countries was estimated at 1.8%. Hungary was able to increase its growth rate from 1.5% to 3.5%.
The KSH publication pointed out the contribution of investments to this robust economic growth, since they increased by 14% in 2014. However, if we take a look at the graph comparing the German and Hungarian GDP, we can see that Hungary still has a lot to catch up: 2014 was the first year since the global economic crisis that its economy grew faster than Germany’s.
The international money and capital markets were influenced by the conflicts in eastern Ukraine and the Middle-East, and by the monetary policy of the US Fed and the European Central Bank. The euro showed a clear trend for depreciation compared to the US dollar from the middle of the year, leading to the lowest rate in the past four years.
The global stock market showed a modest development, with Frankfurt and New York producing historical high scores in December. The BUX index at Budapest Stock Exchange, however, lost around 10%.
The forint started the year just below 300 HUF/EUR. It already passed the threshold value in the middle of January and traded weakly in the subsequent period too. Besides the international events the continued decrease of rates initiated by the Hungarian National Bank (MNB) had their effect. MNB finished cutting them at the end of July – the key interest rate set at 2.1% also influenced the short-term yields on the government bond market.
Hungary profited from the oil drama
According to the IMF there was an average price decrease of 6.3% on the raw material market in 2014, reaching the lowest level in the past four years. According to the Food and Agricultural Organisation of the UN, food prices decreased 3.8%. There was real drama going on with the oil prices – they dropped from USD 115 per barrel in June to as low as USD 55. Brent crude has not been so cheap for five and a half years.
The 28 EU member states traded in a total value of EUR 2,932 billion, however their export volume to third-party countries shrank from EUR 52 billion to 24 billion. Hungary traded 79% of its exports and 75% of its imports within the European Union, with a growth of 5.2% (exports) and 8.9% (imports), measured in euros.
The usual trade deficit towards third-party countries reduced to about half, amounting to EUR 1.335 billion – regarding trade with the USA this proportion was almost higher than half, and Hungary was also able to improve its trade position by EUR 500 million against non-EU European countries.
The KSH publication details the development of the state budget. According to the data supplied by the Ministry of National Economy, the consolidated deficit in 2014 amounted to HUF 826 billion (about EUR 2.7 billion), so HUF 107 billion less than in 2013. The income increased by 5% reaching HUF 17,300 billion, while the expenditures increased less dynamically, by only 4.1%.
Ripped-off citizens: from tobacco products to transactional tax
Thirty-seven per cent of the income in the central budget derived from consumer taxes, which increased by 6.9% compared to 2013. The turnover from value added tax (ÁFA) increased even quicker, by 8.0% to HUF 3,036 billion, which is explained by the online connection to retail cash registers.
The reorganisation of trading tobacco products on the other hand had controversial effects: according to the National Tax and Customs Administration (NAV) only 6.7 billion cigarettes were sold legally in 2014, 28% fewer than in 2013. KSH gave a good reason: parallel to the introduction of the new tobacco shop concessions the commercial margin was increased drastically, causing an increase of 15% in consumer prices.
The income from the so-called transactional tax, which was imposed on the citizens accessing their own money stored by commercial banks, increased to HUF 278 billion (up 7.1%). This should have rather disappointed the government, since this new kind of tax was first implemented in February 2013 and in August the same year was increased by half, removing the maximum amount of HUF 6,000 per transaction.
Big surplus from Brussels
The funds received from the EU also contributed to the increase in the income side of the state budget, up by 4.3% to HUF 1,652 billion compared to 2013. (The Hungarian contribution to the EU budget increased by 6.8% to HUF 291 billion in the meantime.) Even if the government cannot emphasise enough how important the EU funds were in enhancing growth, the citizens paid even more to the state budget, namely HUF 1,754 billion more (up 6.0%).
The state income from private income tax, which amounts to 90% of all payments received from the population, increased in a somewhat more moderate way. The private companies managed to cover part of the gap left by the payments of private citizens, as their contributions grew by 13% to HUF 1,305 billion.
Among the 16 different tax variations the one with the most revenue was the corporate tax with HUF 395 billion (up 22%). “Other centralised revenues” increased by HUF 90 billion, decisively driven by the new e-toll. The revenue collected from the special taxes imposed on the financial sector increased 6.8%, reaching HUF 149 billion.
The expenditure side of the central budget was burdened with interest increases amounting to HUF 1,346 (up 5.3%). Debts in forint reached about 6/10 of the total debt, and the ratio of foreign currency debts from interest payments decreased to one quarter. Expenditure on family and social policies fell 8.5% to HUF 683 billion. Due to the continuous state acquisitions the costs realised on the state asset side grew from HUF 138 billion to HUF 399 billion.
Government bonds for the people!
The performance of the pension funds contributed to 6/10 of the expenditure of the social security institutions by HUF 2,916 billion (up 2.7%). The costs were decreased a little by setting the age limit half a year higher at 62.5 years. Health insurance funds spent HUF 1,326 billion (up 4.2%). In accordance with the government’s aim the expenditure for supporting disabled people and their rehabilitation – which is the largest amount in the budget for health insurance – was further reduced; by 4.1% amounting to HUF 335 billion.
Among the special state funds it was the fund for the public employment program that suffered the highest deficit with HUF 52 billion. On the other hand the funds for research and technology and innovation managed to book a saving of HUF 36 billion.
The national debt amounted to HUF 23,900 billion at the end of 2014. The increase of 8.6% could be explained – besides the new debt – with the overall debt consolidation of cities and municipalities and the state railways MÁV, and with the weaker exchange rate of the forint.
The citizens are holding HUF 2,411 billion in government bonds, 43% more than at the end of 2013. Foreign investors held HUF 4,873 billion (down 2.4%) or 35% of all government bonds issued. The net debt amount increased by HUF 1,164 billion during the year, while the foreign currency debt increased by HUF 472 billion.
The weakening forint caused an increase of HUF 25 billion in foreign-exchange debt in itself, the repayment of a great part of the EU bailout paid in 2008 decreased this position by HUF 618 billion.
(To be continued)