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Commerzbank: Hungary's GDP will rise 1% this year

Germany's Commerzbank predicts that Hungary's GDP will rise 1% this year and 3.2% next year, though cautions that the government may encounter difficulties implementing its planned economic policies.

The German bank's GDP prognosis is more optimistic than those of the Ministry of National Economy, which on August 10 said that Hungary's GDP is likely to rise 0.6% in 2010, and the National Bank of Hungary, which on Monday forecast GDP growth of 0.9% this year and 2.8% in 2011.

Commerzbank cautioned that Hungary's "self-induced crisis of early June" has now eased, but Hungarian assets continue to take collateral damage from developments elsewhere, such as in Romania. Key structural risks arise in Hungary from the unpredictable stance of the new Fidesz administration towards fiscal policy.

The latest data show that 85% of the full-year's budget had already been exhausted by May and it is doubtful that the Fidesz' planned tax cuts would suffice as measures to meet the International Monetary Fund's 3.8% deficit target for 2010.

It also remains to be seen whether or not the IMF and the European Union actually approve Fidesz' proposals within their ongoing programmes. Even the less controversial among the reform measures, such as a tax on banks, have so far received opposition from the European Central Bank, Commerzbank said. It noted, however, that, structural problems aside, the cyclical part of the economy is being buoyed by a strong regional tide. (MTI-ECONEWS)