One-off and off-budget items: An alternative approach

Fiscal analysis requires a set of indicators. For calculating the structural deficit, it is examined whether measures have permanent or temporary budgetary impacts, if any (creative accounting). For measuring fiscal impulse, it is examined when a given measure has a ‘true’ economic impact, if ever (creative accounting). For example, capital transfers to cover the losses of quasi-fiscal activities do not spread to the actual (‘true’) period of time by accrual recording. It is important to remove such illusory items from statistical expenditures and revenues, but in order to account for the ‘true’ effect, expenditures must be augmented, e.g. by quasi-fiscal losses and PPP investment. This type of analytical indicator has been employed by the central bank of Hungary for a decade. According to our experience, this ‘true’ measure is consistent in a macroeconomic sense and methodologically more robust than the statistical deficit, which often requires a subsequent upward revision. This kind of analytical methodology allows flexibility supported by expert judgement, and at the same time it requires transparency of methods and data.