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Analysts view gov’t decision on next IMF tranche as positive

The government's decision not to draw on the IMF credit line is positive, showing the impact of recent reforms, investment analysts said on Tuesday.

Finance minister Péter Oszkó said after the latest review of the IMF-EU-World Bank financing program was completed that Hungary would not use the next loan tranche as euro/forint has now stabilized, the government bond market is working well again and yields have narrowed significantly.

Raffaella Tenconi, chief economist at Wood & Co, an investment group focusing on Central and Eastern Europe, said the decision is testimony of the benefits of the reforms implemented over the past year and will allow Hungary to retain ammunitions for the future, should the need arise.

IMF and EU officials noted that although some risks of overshooting the 2010 deficit target existed, the next government should be able to keep the general government deficit under 4% of GDP as currently forecast in the Budget if no extreme events materialize. “These statements are in line with our view that the strong accusations from Fidesz on the risks of a 7%-7.5% of GDP shortfall next year were primarily a campaign tactic”, she said. (MTI-Econews)