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Commission puts 2009, 2010 deficits slightly over gov't targets

The European Commission sees Hungary's general government deficit as a percentage of GDP reaching 4.1% in 2009 and 4.2% in 2010, slightly over the government's respective targets of 3.9% and 3.8%, the Commission's fresh biannual Economic Forecast published on Tuesday shows.

The Commission expects the 2009 deficit to exceed the government target because of decreasing tax revenue related to diminishing corporate profits. The Commission sees an overshoot of the government target in 2010 because of a bigger than expected local government deficit (1% of GDP as compared to 0.7% in the budget bill). The Commission also did not taken into account planned spending cuts equivalent to 0.4% of GDP for state-owned railway company MÁV in 2010 because of a lack of detailed measures, and it said budget expenditures would probably rise the equivalent of 0.3% of GDP over the target because of more spending in areas such as health care.

The Commission expects Hungary's gross government debt to rise to 79.1% of GDP in 2009 and 79.8% in 2010, a little over the government's respective targets of 78.8% and 79.2% in the country's latest report to Brussels as part if its excessive deficit procedure.

The Commission projects Hungary's economy will contract by 6.5% in 2009 and by 0.5% in 2010. The falls are a little less than the government's forecasts for 6.7% in 2009 and 0.9% in 2010, projections some analysts have said are pessimistic.

The Commission projects Hungary's unemployment rate, calculated using Eurostat methodology, will reach 10.5% in 2009, then continue to rise to 11.3% in 2010 before falling back to 10.5% in 2011.

The forecast puts the harmonized index of consumer prices at 4.3% in 2009, 4.0% in 2010 and 2.5% in 2011.

Hungary's current-account deficit is seen narrowing to 1.3% of GDP in 2009, 1.7% in 2010 and 1.8% in 2011. (MTI-Econews)