"Hungary’s economy will be around stagnation status in 2010, with the general government deficit likely to come in around 4-5% of GDP, depending on the next government economic policy, according to the latest forecast of think tank GKI prepared in co-operation with Erste Bank. The current technocrat government projects a budget deficit of 3.8% of GDP in 2010.Real wages in Hungary will be more or less flat in 2010, as a result of declining employment, decreasing support for the unemployed, smaller benefits in the cafeteria system (due to taxation) and because support for families will not increase in nominal terms. Although the real value of pensions will rise moderately, it will fall slightly in the whole of the year due to the scrapping of the 13th-month pension, the research institute said.
Hungary’s annual average inflation was 4.2% in 2009 and the Dec/Dec CPI came in at 5.6%. The GKI expects inflation to remain between 4% and 5% in the first half of the year and start easing towards 3.0% only from the middle of the year. It sees annual average CPI at 3.5% and expects it to drop to the central bank’s medium-term goal (3.0%) only in 2011.
In the GKI’s view, the Monetary Council of the central bank (NBH) is likely to maintain cautious monetary policy until the elections (April 11 and 25) and if public sector processes remain within acceptable limits for international lenders even under the new government (most likely to be led by opposition party Fidesz), rate cuts can continue in H2 from the current 6.00% base rate, the think tank added."
Source: Portfolio Online Financial Journal
02.02.2010