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Buda-Cash analysts project 2009 deficit of 4-5% of GDP

  Buda-Cash brokerage analysts said on Wednesday that Hungary’s general government deficit could be 4-5% of GDP in 2009 instead of the targeted 2.7%.

Buda-Cash Sales Manager Attila Szitas said there are elements of serious risk with regard to both expenditures and revenues. Szitas added that the budget deficit could be HUF 400-500 billion more than previously predicted.

Revenue could be HUF 300 billion less than the amount forecast by the finance ministry, while taxes and social subsidies could boost expenses by HUF 100-200 billion.

The general government deficit would then reach HUF 1,130-1,230 billion, compared to the HUF 730 billion targeted by the government. Deficit in relation to GDP could be 4-5%, instead of the targeted 2.7%, Szitas said.

Businesses are suffering from a decline in profit, which results in less corporate tax, while revenues from the personal income tax are lower due to a decrease in the amount of paid wages, Szitas said.

The Buda-Cash sales manager added that raising VAT would only compensate for decreasing consumption and would generate no surplus for the budget.

Szitas said that external factors and issues related to global liquidity are currently exercising the most significant impact on forint rates, factors that only the efficiency of fiscal and monetary policy could serve to counterbalance.

Buda-Cash Foreign-Currency Division Manager Andrej Taraczky said the MNB (central bank) efforts to protection the forint can only have limited and temporary effect.

Taraczky said interventions on the open market are not capable of reaching longer-term exchange-rate targets. Neither would raising the base rate improve the present situation, because a foreign currency with a higher exchange rate is only attractive amid an abundance of liquidity. (MTI-Econews)