Ecostat projects Hungary’s government deficit overshoot in 2007

Ecostat, the research arm of Hungary's Central Statistics Office (KSH), forecasts an ESA95 general government deficit equivalent to 7.8% of GDP in 2007 after reaching 10.2% this year, Ecostat director Pál Belyó said on Tuesday. The government projects the 2006 deficit at 10.1% of GDP. Ecostat noted there was a risk of tax revenue falling under the target. However, it said that the government could take steps to fight tax evasion thereby boosting revenue. Ecostat projects GDP will grow 3.9% in 2006, then slow to 2.3% in 2007, according to its latest prognosis published on Tuesday. Hungary's GDP is set to grow by 4.1% in 2006 before slowing to 2.2% in 2007, according to the official government projection. Belyó noted that the prognosis was prepared before anti-government protests escalated into violence during the previous week. Belyó called the National Bank of Hungary's (MNB) decision to raise rates 50 basis points to 7.75% at a meeting on Monday "hasty". In light of the Monday decision, Ecostat puts the year-end base rate at 8.00%, Ecostat analyst Szabolcs Erdős said. For 2007, Ecostat projects a year-end base rate of 7.00%. Ecostat projects annual average inflation of 3.8% in 2006, before picking up to 6.3% in 2007. The research institute expects investment growth of 3.5% in 2006 and a pickup to 6.2% in 2007. It projects final household consumption will grow 2.1% in 2006, but will contract by 0.2% in 2007. "Our investment forecast is probably on the optimistic side, but we count on increasing funds arriving from the European Union," Belyó said. Ecostat forecasts industrial output to grow 8.5%-9.5% in 2006 and 5%-6% in 2007. Exports are forecast to grow 13.6% in 2006 and 8.6% in 2007, while imports expand 10.2% in 2006 and 7.6% in 2007. Ecostat puts Hungary's foreign trade deficit at €2.6 billion in both 2006 and 2007. It projects a slight improvement in the current account deficit from €6.6 billion in 2006 to €6.5 billion in 2007. (Mti-Eco)