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Hungary could emerge from recession in strongest fiscal position

Hungary, which was forced to tighten fiscal policy sharply while most of the world was easing their fiscal stance, may emerge from the current global recession in the strongest fiscal position among the world’s major economies, Merrill Lynch said in its latest weekly analysis of emerging markets.

Hungary may achieve a cyclically-adjusted fiscal surplus in 2010, assuming no pre-election back-pedaling from the fiscal tightening next year, Merrill Lynch said in the analysis.

The headline fiscal deficit, projected at 3.9% of GDP in 2009 and 2010, masks the sharp underlying fiscal tightening as it ignores the severe cyclical downturn, the report explained. The OECD puts Hungary’s output gap at negative 11% of potential GDP in 2010 – the largest among the OECD economies. Overall, this means that Hungary may have a balanced headline budget once the economy rebounds, assuming no changes in fiscal policy, Merrill Lynch said. (MTI-Econews)