Measures to improve Hungary's balance will probably not be taken until after April's general elections, but they will have little effect on this year's expenditures because budget reforms will not be prepared until the second half of the year, research institute Ecostat said in a report released on Wednesday.
Ecostat expects Hungary's cash flow-based deficit to exceed Ft 1,800 billion by year-end, well over the government's target of Ft 1,550 billion. Ecostat projects the cash flow-based deficit to reach 7.4% of GDP, compared to the government's 6.6% target. Ecostat also expects an accrual-based deficit, corrected for the effects of pension reform, of at least 5.6% of GDP, compared to the government's target of 4.7%. The current account deficit will be 7.7% of GDP, according to Ecostat.
Ecostat expects Hungary's economy to expand 4.3% in 2006, compared to 4.1% in 2005. Growth will be driven by exports and investments, with household consumption rising at a rate under GDP growth. Ecostat expects final consumption to increase 2.9% in 2006, 1.2 percentage points more than in 2005. Household consumption is deemed to grow 3%, which corresponds to the growth of real wages. Public sector consumption is expected to increase 2.4% in 2006, more than in previous years. Annual average inflation will be 2.3% in 2006, according to Ecostat.
Ecostat expects exports, in euro terms, to increase 10.1% in 2006 and imports to rise 9.4%. In 2005, exports increased 11.4% and imports rose 8.3%. Ecostat based its projections calculating with a base rate of around 6%, and assumed balanced external conditions, a moderate weakening of the forint and no changes in budget expenditures.