Hungary’s budget deficit will exceed the government’s target this year, according to a survey conducted by Bloomberg News, as the economic downturn causes difficulties for fiscal policy.

According to a Bloomberg survey, the deficit will be 4.3% of GDP in 2023, beating the government’s target of 3.9% of GDP and economists’ estimate of 4.1% of GDP in the second quarter of 2023. Hungary’s GDP will fall by 0.3% this year compared to 2022, while economists had previously estimated growth of 0.2% and the executive’s target was a 1.5% increase.

“Obviously, the most difficult task will be to preserve the budget deficit target,” Prime Minister Viktor Orban’s Chief of Staff Gergeliy Gulyas said at a press conference on Thursday.

When asked if the executive’s target of 1.5% economic growth was possible, he said: “I can confirm that the chances are low.”

“The main cause of the problems related to the economy and the deficit is a much more pronounced collapse of domestic demand. I expect the government to revise the deficit target for 2023 upwards,” said economist Peter Virovac of ING Bank Hungary.

Hungary had the highest inflation rate in the European Union

According to a separate Bloomberg survey, the outlook for Hungary’s economy is gloomier than for Poland’s, which is expected to grow by 0.9 percent this year.

In addition, Poland’s budget deficit could be higher, at 5% of GDP, increasing pressure on the budget ahead of general elections in October. In 2024, the Warsaw government expects a budget deficit of 4.5% of GDP, after a previous estimate of 3.4% of GDP.

Hungary’s economy has contracted for four consecutive quarters, with consumers and businesses suffering from the highest inflation in the European Union and the highest interest rates.

The only good news would be the inflation estimate, with economists predicting it will fall below 9% by the end of the year after nearly 26% in January. Also, according to the study, the interest rate will drop to 11% from the current 15%.