"Hungary is to post a substantial HUF 244.5 billion public sector deficit in November due to seasonal factors and a surplus of HUF 65.6 billion in December, the Finance Ministry projected on Tuesday. This will enable Hungary to meet the 3.4% of GDP deficit target pledged to the International Monetary Fund (IMF).The ministry expects the primary balance of the central state budget to show a HUF 219.7 bn surplus this year, which compares with HUF +215 bn ceiling undertaken in the agreement with the IMF on a EUR 20 bn stand-by credit.
Hungary's budget gap was HUF 11.6 billion in October (on a cash flow basis, excluding local governments), László Keller, state secretary at the Finance Ministry, confirmed the preliminary data to a press conference on Thursday.
In view of the Q3 GDP data, the ministry's growth forecast of 1.8% for 2008 is justified, while its 6.5% annual average CPI projection may be undershot, Keller added.
The consensus forecast for next year's GDP contraction came to 1.0% in a Portfolio.hu poll last week, in line with the cabinet's official forecast. Meanwhile, projections for a 2-3% downturn have been published already.
To Portfolio.hu's question why the ministry refuses to adjust next year's macroeconomic path downward Keller said “it is unnecessary to make another adjustment, as nothing justifies changing the macroeconomic path we have based next year's budget proposal on."
Regarding the medium-term outlook he noted that “it is hard to say when [the external economic environment] will revive to pull Hungary with it."
To another question about recent downgrades from three credit rating agencies (Fitch, Moody's and Standard & Poor's) Keller said “these were probably [the consequence] of developments in earlier weeks", therefore these “reflect on the previous state" of the economy. “From the investors' point of view the country remains in a favourable position," he added."
Source: Portfolio Online Financial Journal
19.11.2008