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2012 fiscal deficit target achievable based on H1 data, analysts say

Deals

This year's general government deficit target is achievable based on the six-month cashflow-based central government figures published on Thursday, analysts interviewed by MTI said.

Figures published by the Ministry for National Economy (NGM) on Thursday show the January-June general government deficit, excluding local councils, reached HUF 517.7 billion, or 89.8% of the full-year target.

Dávid Németh of ING Bank told MTI that the June deficit was in line with expectations, considering the large interest payments and VAT refunds last month. There are no big reserves in the budget, he said, but experience from earlier years shows that the deficit of the second half of the year is not expected to be big.

Németh said the 2.5% government deficit target will be achievable over the year, and the deficit will definitely not exceed 3% of GDP.

Gergely Suppán of TakarékBank said this year's general government budget balance is far better than last year's, even the fact that the six-month deficit came out about 90% of the full-year target is promising as this figure was regularly above 100% in earlier years.

Suppán said there could even be some downside risks as the government has drawn up mid-year a package of measures improving the balance by HUF 140 billion based on expectations from Brussels. Suppan said a HUF 80 billion adjustment package would have been sufficient to meet the deficit target.

He said the assets of remaining pension fund members returning to the state pension system in a second wave this spring could also improve the position of the general government budget slightly.

Suppán said the question still remains when the talks with the IMF/EU can start as those could improve the assessment of the country and bring down CDS premiums.

He pointed out, however, that the extension of the transaction duty over the MNB could modify the picture; it remains to be seen what the opinion of the European Central Bank will be, which could in turn influence the view of the IMF.

Suppán said the deficit will be under 3% next year based on the base scenario, however, the otherwise positive job-saving plan could modify the picture as its financing does not seem well-founded.

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