Hungary’s deficit target has already been lowered twice this year, from 6.8% of GDP to 6.4%, but Veres said it would be further lowered to 6.2%. Under pressure from the European Commission, the government last year introduced a series of measures to cut the deficit, which in 2006 was the highest in percentage terms in the EU at 9.2%. The ultimate target is euro adoption, which requires nations to maintain a deficit of 3% for two years prior to joining the single European currency.

The 2008 deficit target was yesterday cut to 4% from 4.1% in the draft budget accepted by parliament. Hungary is expected to adopt the euro at some point between 2012 and 2014 after cutting the deficit to 2.7% in 2010. However, the deficit reduction has come at a cost, and tax rises, energy price hikes and other measures have hit economic growth and pushed up inflation.
The convergence program lowered the economic growth estimate from 2.2% to 1.7% in 2007 and also bumped up the inflation target to 7.9%. Inflation in 2008 is now expected to be 4.8%. Veres said the convergence program would be submitted to the EU this week ahead of the December 1 deadline.

It is no more than a political slogan that 2008 will be the year of social crisis, Veres opined reflecting to a remark by opposition MP Mihály Varga, who was concerned about the expansion of household loans. Public deficit in proportion of GDP will be 65.4%, 66.1%, and 64.6% in 2007, 2008, and 2009, respectively (compared to the previously projected 70%, 71%, and 69.3%). (Gazdasági Rádió, NG, m&c.com)