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Ecostat raises GDP growth forecast for 2005 to 3.6%

Ecostat, the research arm of Hungary's Central Statistics Office, raised its GDP growth forecast for 2005 to 3.6% in a report published on Friday, a percentage point more than its forecast published in June, Napi Online reported. Ecostat said the general government deficit would be equivalent to 4% of GDP this year, well over the 3.6% target. Ecostat earlier estimated year-on-year GDP growth of 4% in the second quarter of the year, and 1.1% increase over Q1, helped by exports. If this trend continues, industrial output could increase as much as 6% in 2005, Ecostat said. Hungary's real economic indicators, notably a falling inflation rate, are favourable, but the country's financial balance is still not stable. The forint could also weaken during the rest of the year, Ecostat said. Hungary's foreign trade deficit narrowed euro 1billion in first half of 2005 from the same period a year earlier, thanks to increasing exports and slowing imports. Imports are expected to start increasing slowly again in the second half of the year. Still, Ecostat projects a smaller trade deficit for the year than in 2004. Ecostat noted that seven-month inflation slowed to 3.7% yr/yr, in spite of rising oil prices. And over the last several weeks, the impact of high oil prices has been lessened because of the strengthening of the forint. Ecostat put the central bank's base rate at 6% at the end of the year, 25bp under its current rate, adding that a weakening of the forint could cause the bank to tighten its monetary policy.