Investor confidence improving, GKI says

Analysis

GKI projects improving investor confidence, boosted by the announcement of further government reforms, the submission of Hungary's convergence programme to the European Commission in September, better budget figures and a tighter 2007 budget, according to the economic research company's latest forecast, prepared with the assistance of Erste Bank. Marked improvements in investors' confidence, however, will only be seen in the coming year, as the deficit narrows, GKI said. GKI puts GDP growth at 4.4% in 2006 and, as result of austerity measures, 3.5% in 2007. After falling in June, investor confidence stabilised in July because of Parliament's approval of the government's austerity package, rising interest rates and a slight improvement on foreign markets. The forint also started to firm after weakening sharply from mid-June. GKI projects a general government deficit of 8% of GDP in 2006. It says twelve-month inflation will reach 5% in December, rising from 2.5%-3% in summer. Food prices will rise an average annual 7%, with prices of durables up 3%-4%. GKI forecasts a 3% rise of real wages in 2006, with the 5% increase in H1 slowing to 1%-2% in H2. (EcoNews)

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