Govt may modify 2012 budget on changed growth outlook

Hungary’s government could make small corrections next week to the expenditure and revenue sides of the 2012 budget, but it will continue to target a 2.5%-of-GDP fiscal deficit, National Economy Minister Gyorgy Matolcsy said on Wednesday.

The changes could be necessary because the government now puts GDP growth between 0.5% and 1% next year, under the earlier 1.5% projection on which the budget bill is based, Mr Matolcsy said.

A planned agreement with the IMF is not intended to support growth, but to provide a safety net so Hungary can continue to finance itself from the markets.

Speaking about a national growth plan, of which a draft was recently published, Mr Matolcsy said he was asking National Bank of Hungary governor Andras Simor to re-launch a mortgage bond purchase programme or start corporate bond purchases in the interest of supporting economic growth. Mr Matolcsy added that he had been regularly consulting with Mr Simor on instruments of monetary policy that could be used to spur growth, such as ones used by the ECB, the Fed and the BoE.

The central bank could purchase the corporate bonds with its forint resources as forex reserves cannot be used for growth, he said.

The MNB could also rethink and restart a mortgage bond purchase programme, Mr Matolcsy said, noting that the programme had limited success earlier.

Mr Matolcsy said the government was striving to reach a framework agreement with the Hungarian Banking Association in which the MNB participates as an independent institution and can agree with banks on expanding liquidity, among other things.