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Forint slightly stronger after gov't reassurances

The forint traded at 288.26 to the euro early Monday, only slightly stronger than its rate of 289.49 late on Friday in spite of reassurances by a high-ranking government official that Hungary's economic position is “solid” and the government is preparing a plan to achieve the 3.8%-of-GDP deficit target.

Mihály Varga, state secretary at the Prime Minister's Office and the head of a fact-finding commission established to determine the true state of the economy, said on Saturday that comparisons between Hungary and countries in danger of defaulting on sovereign debt were exaggerated.

On Thursday, Lajos Kósa, the vice president of governing Fidesz, said Hungary had “a slim chance” to avoid fiscal and debt troubles similar to those of Greece, and on Friday, government spokesman Péter Szijjártó said likening Hungary to Greece was “no exaggeration”.

    The forint weakened sharply from around 274 to the euro to around 289 after the statements.

In an apparent move to reassure markets, the National Bank of Hungary said late Friday that “revenue and expenditure trends for 2010 imply a 4.5% fiscal deficit”.

Members of the new government had earlier suggested the deficit could reach as much as 7.5% of GDP as debts of state-owned companies were consolidated.

In its statement on Friday, the MNB said, “fiscal tensions stemming from the accumulated debt of state-owned enterprises do not endanger the sustainability of government finances, as a potential takeover of these debts would cause only a one-off increase in the deficit figures.”

The forint traded at 241.50 to the dollar early Monday, little changed from 241.33 late Friday. (MTI-Econews)