Markets less bothered by EDP than government, says City
Hungary's risk metrics suggest that the market is less bothered by Hungary's Excessive Deficit Procedure than the government, London-based emerging markets analysts said on Friday after fresh forecasts published by the European Commission suggested that Hungary's fiscal deficits may overshoot official projections. The EC said it expects the Hungarian budget deficit at 3% of GDP this year and 3.3% next year. Analysts at Morgan Stanley said that based on these forecasts, "it is difficult to see" Hungary leaving the Excessive Deficit Procedure without further corrective policies. "Not that the market seems too bothered, given the continued fall in yields". However, the government does care about the EDP suspension for two reasons. First, prestige: the authorities want to claim success in joining "the club of the fiscally virtuous". Second, and more importantly, the government wants to have a free hand in drafting "next year's electoral budget", without having to worry about potential sanctions under the EDP, Morgan Stanley's London-based analysts said.
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