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Ecostat projects 3.9% GDP growth in 2006, 2.5%-2.8% in 2007

Analysis

Hungary's economy will grow 3.9% in 2006, supported by a pick-up in other European economies and despite government austerity measures, but growth will slow to 2.5%-2.8% in 2007, according to the latest projection by Ecostat, the research arm of the Central Statistics Office (KSH).

Ecostat said the government's measures to consolidate the budget would reduce the general government deficit to around 6% of GDP in 2007, from around 10% of GDP in 2006. The deficit will narrow because of higher revenue, but reforms underway will result in a drop in expenditures in the longer term. Ecostat notes that further austerity measures could have to be introduced if the introduction of reforms is delayed. The effects of reforms should start to be felt in H2 2007 or around the beginning of 2008.
Ecostat said second-half figures for Hungary's economy were slightly more negative than first-half figures. Although household consumption fell from 2.6% in H1 to 1.7% in H2, it will still average 2% for 2006, well over the previous year's 1.4%. In 2006, however, household consumption is expected to grow no more than 0.5%.

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