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Hungary may have smaller deficit than forecast

Hungary, which has missed its budget deficit target every year since 2001, may have a lower shortfall next year than the government forecasts, said István Hamecz, chief economist of the National Bank of Hungary (MNB).

Prime Minister Ferenc Gyurcsány's government raised taxes and cut subsidies to trim the European Union's widest budget deficit, aiming to slash the shortfall by two-thirds by 2009. The EU on November 6 estimated the gap may still be above the target next year. “The deficit will be lower than not only the European Union's projection, but also lower than the government's target,” Hamecz said in an interview during a conference in Budapest. “The bias in the budget is such that revenue is underestimated and spending is overestimated.” The central bank will publish its new official forecasts on November 20. Lowering the shortfall to less than the targeted 6.8% of gross domestic product hinges on the government restraining from spending its reserves, Hamecz said. Hamecz was part of Gyurcsány's Convergence Council, the advisory body that oversaw the drafting of Hungary's deficit cutting program, which the EU endorsed last month. The government relied on the bank's forecast, he said. Bank staffers also “gave the green light” to the plan before it was finalized, he said. (Bloomberg)