"Prior to meeting with IMF chief Dominique Strauss-Kahn, Hungary's Finance Minister János Veres said it was “impossible" for the country not to meet budgetary targets. However, the government is ready to adopt new fiscal measures if necessary to ensure fiscal goals are met, he added.György Barcza, K&H Bank, Budapest
"After citing speculative reasons behind the HUF weakening, Hungary's Finance Minister János Veres said that the ministry is ready to act if needed to keep this year's 2.6% deficit target on track."
"This means there could be a tax hike (excise duty or if more needed, VAT in our view) coming in next months if low inflation and deeper recession leads to significant fallout of revenues. This is not sure yet, the Finance Ministry will wait for the updated EU forecast and could estimate potential consequences before deciding on it."
"In short, economic policy is acting finally, huh. In our view this is the key and it could bring major relief to the forint, which could benefit substantially from it. There may be further consequences of this, if risks materialise, like higher inflation could hurt bonds etc. but generally risks around the forint could decrease significantly over the next weeks.
The global environment may remain shaky as many emerging market currencies are weakening on the prospects of a deeper global recession, so global factors may keep it volatile, but we would become more constructive on the forint for the next 3-6 months from here."
Source: Portfolio Online Financial Journal
14.01.2009