EU neighbours Hungary, Romania struggle with high deficits
Data Fiscal slippage in both countries in first two months
High interest bills, inflationlinked items lift spending
Delayed fiscal consolidation a top 2024 CEE credit risk SP

BUDAPEST, March 28 Reuters Hungary39;s central bank warned on Thursday the 2024 budget gap could exceed the government39;s recently raised target of 4.5 of gross domestic product, calling for credible fiscal planning to cut market risks for central Europe39;s most indebted economy.

Eastern European Union neighbours Hungary and Romania have struggled since the COVID19 pandemic to control their budget deficits, with their shortfalls averaging about 7 of GDP over the past four years, well above EU average levels.

Data for the first two months showed a rise in the deficit in both countries, leading Hungary to abandon plans to cut the shortfall below the EU39;s ceiling of 3 of GDP and raising risks to EU fund flows for Romania, one of the bloc39;s poorest members.

For the debt ratio to decline continuously in 2024 and Hungary39;s risk perception to improve, it is also necessary to achieve the set deficit targets in a credible manner, the National Bank of Hungary said.

The high inflationary environment over the past two years has led to a significant increase in government interest expenditure, which will continue to be a heavy burden on the budget this year as well.

It said the shortfall could exceed the EU39;s 3 of GDP threshold even…