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GKI projects budget adjustments, reform after elections

Reforms and adjustments to the budget can be expected after the new government is formed, to stabilize the forint and make way for further interest rate cuts, a survey by economic think tank GKI and Erste Bank published on Monday said.

The public finance deficit is high, but not out of line with expectations, GKI said. GKI predicted a cashflow-based public finance deficit of Ft 1,750 billion (€6.58 billion) for 2006. GKI said that the new government would carry out budgetary adjustments worth 1%-1.5% of GDP and start reforms in public administration. This will bring a slight rise in inflation, but it is the only chance to reassure investors and drive Hungary's convergence program through with the EU, the study said.
Analysts see the growth rate for 2006 as 4.4%, slightly more than in 2005. They expect inflation to drop to 2.3% in the whole year, following a slight rise towards the end of the year. According to GKI, January figures suggest the construction industry would grow faster than last year, at around 20%.