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2010 eurozone target still feasible, says GKI

Hungary can still meet the Maastricht criteria by 2008, in order to adopt the euro in 2010 as planned, but it will be difficult, requiring a correction in Hungary's balance equivalent to 1.5% of GDP, the head of economic research company GKI told the press on Wednesday.

According to GKI's latest forecast, Hungary cannot achieve the budget target for the general government deficit in 2006, András Vértes said. GKI puts the pension-reform-adjusted deficit at 5.7% of GDP, well over the respective 4.7% target, excluding the cost of motorway projects moved off-budget in a public-private partnership. Including these motorway costs, the deficit is projected at 6.8% of GDP.
Hungary must start reforms immediately, Vértes said. These include the restructuring of Hungary's central administration system, changes to the system of natural gas price subsidies, the reduction of tax incentives and measures to boost tax revenue, such as raising the 15% preferential VAT rate to 20%, in line with the main VAT rate, he said.
GKI projects average annual inflation of 2.6% in 2006.