Agreement with IMF and EU expected by the end of the year, says City


Hungary is expected to come to an agreement with representatives of the International Monetary Fund (IMF) and the EU about its new financing program by October or November, London-based analysts said on Thursday.

Analysts at Goldman Sachs in their projection for investors expect the Hungarian government to "show just as much flexibility" as required for the new agreement.
GS analysts still believe that without an IMF/EU-program the government would be unable to renew its significant foreign currency debt, "if not this year, than in 2013 and later", and Hungary's government would obviously not want to risk a current account crisis before the elections in 2014.
They also added that the financing parties involved will be just as flexible, "especially the EU, which does not want another crisis" in a member country.
GS expects negotiations to end of October or November, although there is a risk for a later agreement, especially if Hungary is able to issue foreign currency-denominated bonds ahead of the end of negotiations with the IMF/EU team.
"There is a low probability, but it is not an impossible scenario," analysts said. Analysts at GS expect the National Bank of Hungary to cut the base rate, currently 7.00%, by 0.50 percentage points in 2012 and by 1.00 percentage points next year.


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