GKI sees slower economic contraction in 2012

Analysis

Economic research company GKI on Friday said it expects Hungary’s economy to contract 1.5% in 2012, unchanged from a forecast last December.

GKI believes successful talks on precautionary financial assistance between Hungary and the International Monetary Fund and European Union can only slow the economic contraction. Recovering the confidence of money and working capital markets will only produce results in 2013 at the earliest, it added.

GKI projects household consumption will contract by 2.5% as real wages drop 3.5%.

It sees investments falling 4% because of a lack of financing and legal uncertainty.

GKI said it was unlikely Hungary would meet the 2.5%-of-GDP general government deficit target for 2012. Instead, it put the gap around 2.9%, citing pressure on the government to keep the deficit under 3%.

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