GKI projects higher growth, firmer forint

Analysis

Economic think tank GKI has raised its projection for Hungary’s 2008 GDP growth to 3.0% in its latest forecast from 2.5-3.0% in May, and it puts the average HUF/EUR rate at 245 for the year, compared to an average of 253.6 in the H1 of 2008.

GKI prepared the projection in cooperation with Erste Bank. GKI attributed the forint’s sharp firming in July -- the forint passed the 230 mark to the euro during the month -- to Hungary’s high base rate as well as high yields on the government securities market. Though the better mood on global financial markets, Hungary’s improving internal and external balances, and speculation may have also contributed to the strengthening.

GKI expects the forint to weaken somewhat during the rest of the year, and it could lose significant ground in the autumn if the minority Socialist government has trouble preparing the 2009 budget.

GKI expects inflation to slow only gradually and puts average annual inflation in 2008 at 6.5%, noting that food and energy price will rise over 10%. It sees twelve-month year-end CPI slowing to 5.5%. (MTI-Econews)

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