300 forints to euro would add HUF 100bn to deficit in 2012 - Matolcsy

Telco

If the forint weakens to 300 to the euro, Hungary's general government balance would be about HUF 100bn worse than the target in the 2012 budget bill, National Economy Minister György Matolcsy said in a written response to a question by an opposition MP posted on the website of Parliament.

The budget bill assumes a HUF/EUR exchange rate of 268.5, but scenarios with a weaker rate were also considered, Matolcsy said. The weakest rate was 300 forints to the euro, he added.

The weaker rate would -- in addition to raising inflation -- raise interest expenditures by HUF 33bn, pension spending by HUF 23bn, stand-by fees by HUF 7.5bn, international membership fees by HUF 4bn and EU payments by HUF 32bn, Matolcsy said. The higher inflation would also generate more budget revenue from taxes on consumption, he added.

Matolcsy said the exchange rate risk and the risk of higher inflation were countered by some HUF 200bn in reserves built into the 2012 budget.

The forint traded around 303 to the euro in the afternoon on Friday.

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