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GKI projects growing inflation, lower interests in H2

If Hungary's new government takes the measures it promised to reduce imbalances, the public finance deficit will no longer rise from autumn, the rate of inflation will temporarily increase and real earnings grow more slowly, economic research institute GKI said in a report published on Monday.

Due to growing investor confidence, the forint will firm and interest rates can go down, GKI said. Compiled in cooperation with Erste Bank Rt, the report said that Hungary's GDP grew by 4.5% in the first quarter of 2006, 2 percentage points over the European Union's average.
In the first three months of the year gross earnings were up by 7.3%. The rise was 9.1% in the private sector, GKI said. Real earnings for the first quarter were up by 5.7% overall. The increase was 6.5% in the private sector and 4% in the public one. After a steady rise for two years, the rate of unemployment began to slightly decline in March.
GKI also noted that the public finance deficit for the first four months of the year, calculated by cash flow, was 60% of the amount anticipated for the entire year. GKI expects the rate of inflation to drop to 2% by late June, but then, due to a 15% hike in gas prices and an increase of the VAT rate to 20%, it would reach 3.9% by the end of the year.