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Hungary gov’t knocks down 2013 GDP projection

Hungary's government is reducing its projection for GDP growth in 2013 to 0.7% from 0.9%, National Economy Minister Mihály Varga said on Tuesday. Varga was speaking at a press conference outlining Hungary's updated Convergence Program, which was submitted to Brussels on Monday. Varga said economic growth could be supported by a better harvest, adding as much as 0.4 percentage point to GDP; higher external demand, boosting net exports; the improved general government deficit; and measures to boost lending, such as those spearheaded by the National Bank of Hungary and Eximbank. Hungary's government is standing by its 2013 general government deficit target of 2.7% of GDP, he said. He acknowledged risks to meeting the target, such as less than expected revenue from the financial transactions duty, but said the government planned no supplemental measures.
    The government wants to consult with the Hungarian Banking Association on the shortfall in revenue from the financial transactions duty, he said, adding that full-year revenue from the tax is expected to fall HUF 80 billion under the full-year HUF 301 billion target. Varga said central budget reserves could fall to 0.6% of GDP due to risks surrounding the Hungarian economy, but he added that the level would still be sufficient to safely meet the 2013 deficit target. The government will not freeze the reserves, but the risks will reduce the reserves by around 0.7 percentage points, he added.
    The government targets GDP growth of 1.9% for 2014, he said. The government cut its projection for average annual inflation this year to 3.1% from 5.2%, taking into consideration government-mandated reductions in household utilities prices. It sees CPI reaching 3.2% in 2014. The government calculated with a forint/euro exchange rate of 293.1 in the program update, weaker than the earlier assumed 283, Varga said.